<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended JULY 31, 2004

                         Commission file number 0-29671

                               SGD HOLDINGS, LTD.
                 (Name of small business issuer in its charter)

           DELAWARE                                     13-3986493
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                    4385 SUNBELT DRIVE, ADDISON, TEXAS 75001
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (972) 248-0266

           Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $.0001 PAR VALUE
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ] .

Check if delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year - $12,977,574.

As of October 31, 2004, the registrant had outstanding 45,666,824 shares of its
common stock, par value $.0001, its only class of voting securities. The
aggregate market value of the shares of common stock of the registrant held by
non-affiliates on October 26, 2004, was approximately $717,505 based on its
closing price on the OTC Bulletin Board on that date. (See Item 5).

                       DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit index. Transitional Small
Business Disclosure Format (Check one): Yes [ ] No [ X ].

<PAGE>


                               SGD HOLDINGS, LTD.

                                TABLE OF CONTENTS

                                   FORM 10-KSB

                                     Part I

                                                                            Page
Item 1            Description of Business                                     3
Item 2            Description of Property                                     8
Item 3            Legal Proceedings                                           8
Item 4            Submission of Matters to a Vote of Security Holders         9

                                     Part II

Item 5            Market for Common Equity and Related Stockholder Matters   10
Item 6            Management's Discussion and Analysis or Plan of Operation  12
Item 7            Financial Statements                                       21
Item 8            Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure                        48
Item 8A           Controls and Procedures                                    48
Item 8B           Other Information                                          48

                                    Part III

Item 9            Directors and Executive Officers of the Registrant         49
Item 10           Executive Compensation                                     51
Item 11           Security Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters                 52
Item 12           Certain Relationships and Related Transactions             53
Item 13           Exhibits                                                   54
Item 14           Principal Accountant Fees and Services                     54


                                       2
<PAGE>

ITEM 1.  DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT

On April 20, 2000, pursuant to an agreement and plan of reorganization dated
April 11, 2000, SGD Holdings, Ltd. ("SGD" or the "Company") acquired 100% of the
issued and outstanding common stock of Benton Ventures, Inc. ("Benton"), a
Delaware corporation, in exchange for 1,200,000 newly issued common shares of
SGD. On April 25, 2000, the Board of Directors of SGD elected to merge Benton
into SGD pursuant to Section 253 of Delaware's General Corporate Laws. As a
result of the merger, SGD was the surviving company and assumed the reporting
responsibilities under successor issuer status as more fully detailed in Section
12(g)(3) of The Securities Exchange Act of 1934.

SGD, formerly Transun International Airways, Inc., was incorporated May 22,
1996, in Delaware and until June 1999 was a development stage company with plans
to establish itself as an air transport company providing non-scheduled air
service (charter flights) for tour operators, charter brokers, cruise line
casinos, theme parks and theme attractions. On June 10, 1999, the Company
changed its name from Transun International Airways, Inc. to Goldonline
International, Inc. and on January 24, 2001, the Company changed its name from
Goldonline International, Inc. to SGD Holdings, Ltd.

On June 10, 1999, SGD acquired all of the issued and outstanding common stock of
both Con-Tex Silver Imports, Inc. ("Silver"), incorporated September 12, 1994,
in Texas and Jewelry Solutions & Commerce, Inc. ("Jewelry"), formerly Gold
Online.com, Inc., incorporated February 3, 1999, in Delaware. For accounting
purposes, the acquisitions have been treated as the acquisition of Silver and
Jewelry by SGD with Silver as the acquirer (reverse acquisition). The historical
financial statements prior to June 10, 1999, are those of Silver. On January 17,
2001, Gold Online.com, Inc. changed its name to Jewelry. In November and
December 2003, Jewelry opened two retail jewelry stores in Texas.

Effective October 1, 2000, the Company acquired, pursuant to an Agreement and
Plan of Merger the operations and business of HMS Jewelry Company, Inc. ("HMS"),
in exchange for $4,500,000 in cash and convertible promissory notes in the
amount of $2,500,000. The transaction resulted in the merger of the business and
operations of HMS Jewelry Co., Ltd., a Texas limited partnership, and HMS
Operating Company, a Texas corporation, into a newly formed subsidiary of the
Company, HMS. HMS is a national jewelry wholesaler, specializing in 18K, 14K and
10K gold and platinum jewelry, with headquarters in Addison, Texas. HMS markets
its products to a network of over 30,000 retail jewelers, through a catalog and
telephone ordering system and through its B2B online catalog at
http://www.HMSgold.com.

Rings N' Things, LLC ("Rings") was incorporated on September 2, 2003, in Nevada
and is an 80% subsidiary of Jewelry. Rings opened two retail jewelry stores
before the holiday season in October and November 2003. Both stores have now
been closed and Rings is currently inactive.

                                       3
<PAGE>

Effective April 1, 2004, HMS completed the acquisition of 80% of Gem Pak, Inc.
("Gem Pak") in a transaction treated as a purchase for accounting purposes. SGD
issued 100,000 shares of its common stock for 80% of Gem Pak's common stock. Gem
Pak was incorporated in Texas on May 24, 2002. Gem Pak sells packaging and
display materials to the same customer base as HMS.


DISCONTINUED OPERATIONS

(a) On April 23, 2003, Silver filed a Voluntary Petition for Reorganization
under Chapter 11 of Title 11 of the United States Code in the United States
Bankruptcy Court for the Northern District of Texas, Fort Worth Division, Case
No. 03-43783-DML-11. The reorganization filing was necessitated as a result of
James G. Gordon, a Director and former President of SGD, locking Silver
employees out of the office and warehouse premises which he owned and leased to
Silver, which prevented Silver from operating its business.

During the week ended July 25, 2003, management of the Company determined that
the additional costs being charged as a result of operating in bankruptcy would
make it virtually impossible to reorganize Silver. Accordingly, in SGD's next
scheduled Board of Director's meeting, August 7, 2003, the Board voted to
convert the Chapter 11 case to Chapter 7 and all operations of Silver were
immediately discontinued. The Voluntary Petition for Reorganization under
Chapter 11 was converted to Chapter 7 on September 23, 2003.

 Silver was involved in both the wholesale and retail jewelry business,
principally silver, with retail locations in Texas. The wholesale operation of
Silver consisted of sales directly from its headquarters in Conroe, Texas, sales
from a Dallas location and sales from jewelry shows at locations throughout the
south central United States.

(b) Effective September 1, 2001, SDG acquired the business and operations of
Tandori, Inc., ("Tandori") pursuant to a Transfer and Assumption Agreement in
exchange for $300,000 in cash paid to the franchisor and assumption of existing
liabilities. The acquisition included the LifeStyle Technologies(TM) franchise
for Raleigh, North Carolina, which had commenced operations in January 2001, and
three other locations which had not yet commenced operations; part of Houston,
Texas and Wilmington and Greensboro, North Carolina. In addition, SGD issued
800,000 shares of its common stock, valued at $160,000, based upon the quoted
price on the date of transfer, to certain principles of the new operation.

On July 17, 2003, the Company received an offer to sell the assets and business
of Tandori, effective July 31, 2003, in exchange for assumption of liabilities,
excluding payroll taxes. In addition, the buyer agreed to pay to SGD up to 50%
of any profits the buyer might make from the sale of Tandori's assets, up to
$1,000,000, if the buyer should sell the assets to a third party within three
years of the acquisition. The Company subsequently approved the offer and the
operations have been included in discontinued operations for the periods
presented. The purchaser was a company owned by G. David Gordon and the
President of Tandori.

                                       4
<PAGE>

Tandori operated under the LifeStyle Technologies(TM) name as a full service
home technology integration company providing complete installation and
equipment for structured wiring, home audio, home theater, home security, PC
networking, central vacuum, accent lighting and other current technology
applications.

BUSINESS OF ISSUER

SGD is now a holding company engaged in acquiring and developing jewelry related
businesses and other businesses which allow the Company to better diversify.

HMS is a wholesale jewelry distributor with headquarters in Addison, Texas. HMS
primarily sells gold products to a network of over 30,000 retail jewelers,
through a catalog and telephone ordering system and through its B2B online
catalog at http://www.HMSgold.com.

Gem Pak sells packaging and display materials to the same customer base as HMS.

Jewelry established an Internet jewelry presence in the late fall of 1999, when
Jewelry began selling through an e-commerce site, located at
http://www.GoldOnline.com, which has now been licensed to a third party. Jewelry
is currently operating two retail jewelry stores which market principally silver
jewelry.

FISCAL YEAR

As used throughout this document, fiscal 2004 refers to the fiscal year ended
July 31, 2004, and fiscal 2003 refers to the fiscal year ended July 31, 2003.

PRINCIPAL PRODUCTS AND MARKETS

HMS is a national jewelry wholesaler, specializing in 18K, 14K and 10K gold and
platinum jewelry, with headquarters in Addison, Texas. HMS markets its products
to a network of over 30,000 retail jewelers through a catalog and telephone
ordering system and through its B2B online catalog at http://www.HMSgold.com.
HMS reduces gross sales by the amount of returns and discounts to determine net
sales each month. Each month a reserve is established for returns based on HMS's
historical experience, the amount of gross sales and the customer base. Total
actual returns amounted to approximately 9.23% and 10.55% of gross sales in
fiscal 2004 and fiscal 2003, respectively.

Gem Pak sells packaging and display materials to the same customer base as HMS.
Jewelry has two retail jewelry stores which sell primarily silver jewelry.
Approximately 66% of Jewelry's sales were jewelry which had been acquired from
HMS. The sales from HMS to Jewelry are eliminated in consolidation.

                                       5
<PAGE>

DISTRIBUTION

HMS generally utilizes the services of United Parcel Service for shipping their
products; whereas, Gem Pak utilizes both United Parcel Service and Federal
Express for shipping their products.

COMPETITION

HMS operates as a wholesale jewelry distributor, and as such, its primary
competitive factors in the industry are price, quality and customer service. HMS
has developed specialized customer service programs that are important
competitive factors in sales to jewelry retailers. The recent trend towards
consolidation at the retail level in the jewelry industry and low labor costs
outside the United States may increase the level of competition facing us. There
can be no assurance that we will be able to compete successfully against current
and future competitors or that competitive pressures we face will not have a
material adverse effect on our business, operating results and financial
condition.

Gem Pak sells packaging and display materials, principally to the same customer
base as HMS. HMS is integrating the accounting, fulfillment and customer service
aspects of Gem Pak into their existing operations.

SOURCE AND AVAILABILITY OF RAW MATERIALS

HMS and Gem Pak acquire inventory from a large number of sources, the loss of
any one of which would not have a material impact on their operations.

HMS uses gold consignment arrangements with a gold lender to supply
substantially all of its gold needs. See Item 6. "Management's Discussion and
Analysis or Plan of Operation - Liquidity and Capital Resources."

                                       6
<PAGE>

SEASONAL NATURE OF BUSINESS

The Company's business is seasonal in nature. Presented below are the Company's
net sales from continuing operations for each quarter of fiscal 2004 and fiscal
2003:
                                                                  Net Sales
                                                              ($ in thousands)
                                                              ----------------
Fiscal 2004 ended July 31, 2004

          First quarter                                           $     3,545
          Second quarter                                                4,210
          Third quarter                                                 2,577
          Fourth quarter                                                2,646
                                                                  -----------
            Total                                                 $    12,978
                                                                  ===========

Fiscal 2003 ended July 31, 2003

          First quarter                                           $     3,995
          Second quarter                                                4,649
          Third quarter                                                 2,264
          Fourth quarter                                                2,514
                                                                  -----------
            Total                                                 $    13,422
                                                                  ===========


HMS has experienced a seasonal pattern in its operating results with its second
quarter (ended January 31) typically having the highest sales. This fluctuation
is mitigated to a degree by the early placement of orders by many of their
customers, particularly for the Christmas holiday season. This accounts for the
first quarter (ended October 31) generally having higher sales than the third
and fourth quarter. In addition, HMS markets holiday and seasonal products year
round for such occasions as Mother's Day, Valentine's Day, Father's Day,
religious holidays and school graduations.

MAJOR CUSTOMERS

HMS services a significant number of jewelry store customers located throughout
the United States, the largest of which accounts for 6.4% of net sales. The loss
of any one customer would not have a material impact on the operations of HMS.

EMPLOYEES

At July 31, 2004, the Company had 42.5 equivalent employees (40 full-time) as
compared to 25.5 equivalent employees (23 full-time) at July 31, 2003.

                                       7
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

At July 31, 2004, SGD maintained its corporate headquarters at 4385 Sunbelt
Drive, Addison, Texas, which is in the offices of HMS.

HMS maintains its wholesale gold inventory and operations in Addison, Texas. The
office and operations area comprises 8,075 square feet and is leased from a
company owned by the President of HMS for $8,075 per month.

Gem Pak maintains its warehouse and distribution center in Richardson, Texas.
The operations area is currently leased for $4,055 per month.

Jewelry leases its two retail locations for $2,500 and $3,843 per month,
respectively.


ITEM 3.  LEGAL PROCEEDINGS

On December 13, 2002, SGD filed a petition against James G. "Greg" Gordon
("Gordon") in the 342nd District Court, Tarrant County, Texas alleging breach of
fiduciary duty, conversion of corporate funds and misappropriation of corporate
funds. SGD alleged that Gordon, who was President of SGD from June 10, 1999,
until November 25, 2002, wrongfully and without authority or approval,
transferred approximately $2.7 million from two separate SGD bank accounts into
an account or accounts held by Silver. Thereafter Gordon utilized a portion of
SGD's funds for his and his family's personal use and enjoyment, his personal
financial gain and for unauthorized transactions on Silver's behalf. SGD was
seeking to recover its damages, which were in excess of $2.7 million, costs of
court and pre-judgment interest as allowed by law. SGD dismissed its claim
against Gordon as it determined the cost would exceed any benefit and the funds
it saved could be used to pay creditors of the Company; however the Company
still maintains the right to re-file the lawsuit against Gordon.

On January 3, 2003, James G. Gordon and Lisa K. Gordon ("Plaintiffs") filed a
petition in the District Court of Montgomery County, Texas, Cause No.
03-01-00006-CV against SGD Holdings, Ltd., G. David Gordon and David Covey. G.
David Gordon is the brother of James G. Gordon and David Covey was president of
Tandori, a wholly owned and currently inactive subsidiary of SGD. Plaintiffs, in
their claim asserted against SGD, are seeking to declare the one for six stock
split, which occurred in September 1999, void. If declared void, they claim they
would presently own 75,000,000 shares of SGD common stock instead of 11,250,000
shares of SGD common stock as currently reported by the Company. In October
2004, James Gordon was able to obtain a temporary restraining order in this
action which prevents SGD from raising any additional equity capital until the
trial is completed. Trial in this matter is scheduled to commence in the second
week of January 2005. Management of the Company does not expect to incur any
significant liability; however, there are a number of unresolved issues which
could result in liability to the Company.

                                       8
<PAGE>

In March 2003, Silver filed a petition in the District Court of Galveston
County, Texas, Cause No. 03CV0316 against Debbie King, the sister-in-law of
James G. Gordon. Effective October 28, 2002, James G. Gordon, the former
President of Silver entered into a transaction with his sister-in-law whereby he
sold the assets of one of the retail locations of Silver for cash proceeds of
$30,645. The Company recorded a loss on the transaction of $51,015 in fiscal
2003. In its claim, Silver alleged conspiracy, unjust enrichment and that the
sale of the retail location is void because of unconscionability. Additionally,
Silver requested a return of profits received by Defendant. This action is
currently stayed due to Silver filing a Voluntary Petition for Reorganization
under Chapter 11 of Title 11 of the United States Code on April 23, 2003, as
described below.

On April 23, 2003, SGD's wholly owned subsidiary, Silver filed a Voluntary
Petition for Reorganization under Chapter 11 of Title 11 of the United States
Code in the United States Bankruptcy Court for the Northern District of Texas,
Fort Worth Division, Case No. 03-43783-DML-11. The reorganization filing was
necessitated as a result of James G. Gordon, a Director and former President of
SGD, locking Silver employees out of the office and warehouse premises which he
owned and leased to Silver, which prevented Silver from operating. The Voluntary
Petition for Reorganization under Chapter 11 was converted to Chapter 7 on
September 23, 2003.

On May 2, 2003, Lakewood Development Corporation ("Lakewood") filed a petition
in the District Court of Tarrant County, Texas, Cause No. 96 198685 03 against
SGD and James G. Gordon, former President of SGD. Lakewood, in its claim
asserted against SGD and Gordon, alleged fraud in stock transactions under
Section 27.01 of the Texas Business and Commerce Code, violations of the
anti-fraud provisions of the Texas Securities Act and common law fraud. In
addition, Lakewood is alleging breach of fiduciary duty against Gordon. Lakewood
is seeking restitution of the $7,817,500 which it invested in common stock based
upon representations made by Gordon, together with damages, expenses and
interest. Presently, Company counsel is negotiating a settlement with Lakewood.
The Company has accrued $1,000,000 as an estimate of the cost of the settlement.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                       9
<PAGE>

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

SGD had been a non-reporting publicly traded company with certain of its
securities exempt from registration under the Securities Act of 1933 pursuant to
Rule 504 of Regulation D and Rule 701 of the General Rules and Regulations of
the Securities and Exchange Commission. SGD's common stock is now traded on the
OTC Bulletin Board operated by NASDAQ under the symbol SGDD. SGD had not filed a
registration statement with the Securities and Exchange Commission and had not
been a reporting company under the Securities Exchange Act of 1934 prior to
April 3, 2000.

The NASDAQ Stock Market implemented a change in its rules requiring all
companies trading securities on the OTC Bulletin Board to become reporting
companies under the Securities Exchange Act of 1934. The Company was required to
become a reporting company by the close of business on April 3, 2000, or no
longer be listed on the OTC Bulletin Board. SGD effected a merger with Benton
and has become a successor issuer thereto in order to comply with the reporting
company requirements implemented by the Nasdaq Stock Market.

The following chart shows the quarterly high and low bid prices for the
Company's common stock for the last two years, as reported on the OTC Bulletin
Board. The prices represent quotations by dealers without adjustments for retail
mark-ups, mark-downs or commissions and may not represent actual transactions.

<TABLE>

                                       Opening         High             Low         Closing
                                         Bid            Bid             Bid           Bid
                                         ---            ---             ---           ---
<S>                                     <C>            <C>             <C>           <C>
Quarter ended October 31, 2003          $.01           $.03            $.01          $.01
Quarter ended January 31, 2004          $.01           $.08            $.01          $.03
Quarter ended April 30, 2004            $.03           $.08            $.02          $.04
Quarter ended July 31, 2004             $.04           $.04            $.02          $.02


Quarter ended October 31, 2002          $.07           $.18            $.04          $.06
Quarter ended January 31, 2003          $.06           $.17            $.03          $.05
Quarter ended April 30, 2003            $.05           $.12            $.05          $.06
Quarter ended July 31, 2003             $.06           $.06            $.01          $.01
</TABLE>

                                       10
<PAGE>

HOLDERS

As of July 31, 2004, there were approximately 263 holders of record of the
Company's common stock, an undetermined number of which represent more than one
individual participant in securities positions with the Company.

DIVIDENDS

The Company has not previously paid cash dividends on its common stock, and
intends to utilize current resources to expand; thus, it is not anticipated that
cash dividends will be paid on the Company's common stock in the foreseeable
future.

Securities Authorized for Issuance Under Equity Compensation Plans

As of July 31, 2004, the Company did not have any outstanding options or
warrants with respect to compensation plans (including individual compensation
arrangements) under which common stock of the Company is authorized for
issuance.

Recent Sales of Unregistered Securities

During the year ended July 31, 2004, the Company issued 6,210,746 shares of its
common stock in exchange for $62,107 in accounts payable and accrued expenses
owed by the Company. The shares were issued pursuant to an exemption from
registration under Section 4(2) promulgated under the Securities Act of 1933, as
amended.

During the year ended July 31, 2004, the Company issued 550,000 shares of its
common stock in exchange for loan extension fees valued at $5,500. The shares
were issued pursuant to an exemption from registration under Section 4(2)
promulgated under the Securities Act of 1933, as amended.

During the year ended July 31, 2004, the Company issued 100,000 shares of its
common stock in exchange for 80% of the common stock of Gem Pak, Inc. The shares
were issued pursuant to an exemption from registration under Section 4(2)
promulgated under the Securities Act of 1933, as amended.

During the year ended July 31, 2004, the Company sold 2,540,001 shares of its
common stock in private transactions for $38,100. The shares were issued
pursuant to an exemption from registration under Section 4(2) promulgated under
the Securities Act of 1933, as amended.

                                       11
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

From time to time, the Company may publish forward-looking statements relative
to such matters as anticipated financial performance, business prospects,
technological developments and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. All statements other than statements of historical fact included in
this section or elsewhere in this report are, or may be deemed to be,
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Exchange Act of 1934. Important factors that
could cause actual results to differ materially from those discussed in such
forward-looking statements include: 1. General economic conditions and their
impact on the retail and wholesale sales environment; 2. Fluctuations in the
price of gold and other metals used to manufacture our jewelry; 3. Customer
requirements; 4. Competition from outside the United States where labor costs
are substantially lower; and 5. Success of marketing, advertising and
promotional campaigns.

The continuing operations of the Company consist primarily of the wholesale
sales operations of HMS.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital decreased to $184,360 at July 31, 2004, from
$2,198,988 at July 31, 2003. The working capital decrease of $2,014,628 consists
of a decline in current assets of $306,425 and an increase in current
liabilities of $1,708,203. The decline in current assets is primarily composed
of a decline in cash of $203,684, a net increase in inventory of $251,644, a
decrease in deferred taxes of $174,300 and a decrease in prepaid expenses and
other assets of $120,069. The increase in current liabilities includes an
increase in notes payable of $263,198, an increase in accounts payable of
$127,444, an increase in amounts due to related parties of $202,938 and an
increase in accrued expenses of $1,094,135.

The Company had a net loss of $3,572,310 for fiscal 2004 which included a charge
for goodwill impairment of $1,988,426 and a charge of $1,000,000 for an estimate
of the Lakewood litigation settlement. Accordingly, the Company still incurred a
loss of $583,884 in addition to the charges above. The Company has two notes, in
the amount of $1,250,000 and $835,000, which are currently past due, and because
of the temporary restraining order granted to James G. Gordon the Company is
unable to raise any equity capital. Trial for the litigation with James G.
Gordon is scheduled to commence during the second week of January 2005. The
Company does not have sufficient cash flows to meet its obligations currently
due within the next 12 months. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.

If the Company is (i) unable to grow its business or improve its operating cash
flows as expected, (ii) unsuccessful in extending a substantial portion of the
debt repayments currently past due, (iii) unsuccessful in its litigation with
James G. Gordon, (iv) unable to raise additional funds through private placement
sales of its common stock, or (v) unable to satisfy the covenants of the gold
consignment agreement, then the Company may be unable to continue as a going
concern. There can be no assurance that additional financing will be available


                                       12
<PAGE>

when needed or, if available, that it will be on terms favorable to the Company
and its stockholders. If the Company is not successful in generating sufficient
cash flows from operations, or in raising additional capital when required in
sufficient amounts and on terms acceptable to the Company, these failures would
have a material adverse effect on the Company's business, results of operations
and financial condition. If additional funds are raised through the issuance of
equity securities, the percentage ownership of the Company's current
shareholders would be diluted. These consolidated financial statements do not
include any adjustments that may result from the outcome of these uncertainties.

The Company has a number of unresolved legal issues with one of its Directors,
James G. Gordon and will continue to have high legal costs until these issues
can be resolved. The Company anticipates that it will be able to raise
additional funds, as necessary, to fund these lawsuits.

HMS relies on a gold consignment program, short-term borrowings and internally
generated funds to finance its inventories and accounts receivable. HMS fills
most of its gold supply needs through a gold consignment arrangement with a gold
lender. Under the terms of that arrangement, HMS is entitled to lease the lesser
of an aggregate of 13,200 ounces of fine gold or an aggregate consigned gold
value not to exceed $4,950,000, reduced by any outstanding balance on its
$1,500,000 line of credit. Payment for the consigned gold and the line of credit
is secured by substantially all property of HMS, including its cash, accounts
receivable, inventory and machinery and equipment, the corporate guaranty of SGD
and the individual guaranty of G. David Gordon, CEO of HMS. HMS pays the gold
lender a consignment fee based on the dollar value of ounces of gold outstanding
under their agreement, which value is based on the daily Second London Gold Fix.
HMS believes that its financing rate under the consignment arrangement is
substantially similar to the financing rates charged to gold consignees
similarly situated to HMS. As of July 31, 2004, HMS held 8,608.1 ounces of gold
on consignment with a market value of $3,369,210, and at July 31, 2003, HMS held
9,925 ounces of gold on consignment with a market value of $3,520,894.

The consignment agreement contains restrictive covenants relating to maximum
usage, net worth, working capital and other financial ratios and the agreement
requires HMS to own a specific amount of gold at all times. Management believes
that HMS is in compliance with all covenants of the consignment agreement,
except one, for which HMS has requested a waiver of the covenant from the gold
lender.

The consignment agreement is terminable by the gold lender upon 60 days notice.
If the gold lender were to terminate its existing gold consignment arrangement,
HMS does not believe it would experience an interruption of its gold supply that
would materially adversely affect its business. HMS believes that other
consignors would be willing to enter into similar arrangements should its gold
lender terminate its relationship with the company.

                                       13
<PAGE>

Consigned gold is not included in inventory, and there is no related liability
recorded. As a result of these consignment arrangements, HMS is able to shift a
substantial portion of the risk of market fluctuations in the price of gold to
the gold lender, since HMS does not purchase gold from the gold lender until
receipt of a purchase order from, or shipment of jewelry to, its customers.

While we believe our supply of gold is relatively secure, significant increases
or rapid fluctuations in the cost of gold may impact the demand for our
products. During the past two years, the average closing price of gold according
to the Second London Gold Fix ranged from a low of $348 to a high of $427 and
averaged $393 per ounce during fiscal 2004 and ranged from a low of $302 to a
high of $390 and averaged $337 per ounce in fiscal 2003. Fluctuations in the
precious metals markets and credit may result in an interruption of our gold
supply or the credit arrangements necessary to allow us to support our accounts
receivable and continue the use of consigned gold.

The gold lender has also provided a line of credit to HMS in the amount of
$1,500,000 that is due on demand, including interest at the lender's prime rate
plus 3/4%. HMS does not have any advances on this line of credit at July 31,
2004. During fiscal 2004 HMS borrowed and repaid a total of $650,000 on this
line of credit and during fiscal 2003 HMS borrowed and repaid a total of
$950,000 on this line of credit.

During fiscal 2004, the Company had $155,607 in cash used in operating
activities as compared to $974,875 ($397,559 used by continuing operations) in
fiscal 2003. During fiscal 2004, the more significant items of operating
activities which either used cash, or were negative adjustments to the net loss,
were the net loss of $3,572,310 and an increase of inventory of $83,911. The
more significant sources of cash or positive adjustments to the net loss for
operating activities in fiscal 2004 were asset impairment of $1,988,426,
depreciation and amortization of $70,317, loss on sale of assets of $73,508,
decrease in other assets of $160,034, increase in accounts payable of $132,960
and increase in accrued expenses of $1,090,656. During fiscal 2003 the major
uses of cash for operating activities were the net loss of $243,333, an increase
in inventory of $212,624 and the decrease in accounts payable of $408,031. The
most significant source of cash from operating activities and non-cash
adjustments was the decrease in other assets of $278,303.

Investing activities during fiscal 2004 used $131,775 for capital expenditures.
During fiscal 2003, the Company used $151,253 in investing activities, which
included $107,500 for capital expenditures and $43,753 from discontinued
operations.

During fiscal 2004, the Company had $83,698 in net cash provided by financing
activities. The cash provided by financing activities in fiscal 2004 included an
increase in amounts due related parties of $203,241, proceeds from the sale of
common stock of $38,100, repayment of notes payable of $15,380 and loans made to
Gem Pak prior to acquisition of $148,477. During fiscal 2003, the Company had
$868,601 ($651,477 for discontinued operations) in net cash provided by
financing activities. The $217,124 in cash provided by continuing operations
includes $200,000 in proceeds from common stock sales, $30,000 in related party
note proceeds and $12,876 in note payments.

                                       14
<PAGE>

The Company is currently budgeting $120,000 for capital expenditures for fiscal
2005. The Company will either use cash or its existing credit facilities to
finance the planned capital expenditures.


SALES AND COST OF SALES

Sales and related cost of sales are summarized as follows:

                                                  2004               2003
                                                  ----               ----

Sales and revenues                        $    12,977,574    $     13,422,192
Cost of sales                                   9,680,269          10,083,982
                                          ---------------    ----------------
Gross profit                              $     3,297,305    $      3,338,210
                                          ===============    ================

Fiscal 2004
-----------
Sales decreased 3.3% in fiscal 2004 as compared to fiscal 2003. The decline in
sales is primarily due to the two-year cycle which HMS uses for its catalog.
Sales have historically been higher during the first year of the catalog, which
was introduced in May and June 2002. Accordingly, most of fiscal 2004 sales were
from the second year of the catalog. In May and June of 2004, a new catalog was
introduced; however, the increased sales impact did not begin until the last
month of fiscal 2004. The majority of the impact should be in fiscal 2005.

During the past two years, the average closing price of gold according to the
Second London Gold Fix ranged from a low of $348 to a high of $427 and averaged
$393 per ounce during fiscal 2004 and ranged from a low of $302 to a high of
$390 and averaged $337 per ounce in fiscal 2003.

Fiscal 2003
-----------
Fiscal 2003 sales increased $1,460,553 (12%) from the prior year, despite the
impact of the economy. The increase is primarily due to the impact of the new
catalog which was introduced at the end of fiscal 2002 and to the increase in
gold prices during fiscal 2003.

During fiscal 2004 the gross profit margin was 25.4% as compared to 24.9% in
fiscal 2003. HMS gross profit margin declined in fiscal 2004 to 23.7% from 24.9%
in fiscal 2003, primarily due to the increase in gold price. HMS has a fixed
amount of profit for each ounce of gold sold; accordingly with the gold value
increasing, their gross profit percentage is a smaller percentage of sales. The
retail jewelry stores and Gem Pak's packaging and display sales are at higher
gross profit margins and they account for the overall increase in gross profit
percentage.

                                       15
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Fiscal 2004 - Gold Operations - HMS SG&A
----------------------------------------
During fiscal 2004, HMS reduced its selling, general and administrative ("SG&A")
expenses by $120,124 (4%) from the prior year amount.

Accounting and legal costs increased to $85,168 in fiscal 2004 from the prior
year amount of $32,024. The fiscal 2004 amount includes $28,000 in allocated
audit costs which were included in corporate SG&A in fiscal 2003. In addition,
HMS completed the amendment and restatement of it's gold consignment agreement
in June 2004, which accounted for the increase in legal costs.

A number of other costs and expenses both increased and decreased as follows:
advertising - decreased $77,432; commissions - decreased $28,746; jewelry shows
- increased $33,847; and salaries - decreased $27,266.

Advertising costs decreased and jewelry costs increased, primarily due to
allocating more of the advertising budget to jewelry show participation.
Commissions are lower due to lower sales and salaries are lower due to temporary
staff reductions.

Fiscal 2003 - Gold Operations - HMS SG&A
----------------------------------------
During fiscal 2003, the SG&A expenses of HMS increased $378,716 (16%) to
$2,699,429 from $2,320,713. The 16% increase in SG&A is consistent with the 12%
sales increase. The major items which increased include salaries of $118,791;
catalog costs of $105,327; freight of $45,839; and commissions of $32,667. The
majority of the increases are associated with the increased level of sales and
the costs associated with the new catalog, which was distributed during the
fourth quarter of fiscal 2002.

Corporate and other SG&A
------------------------
Corporate and other SG&A consist of the following:

                                                    2004              2003
                                                    ----              ----

Corporate                                         $409,448          $461,041
Retail jewelry                                     400,518                --
Gem Pak                                            169,323                --
                                                  --------          --------
     Total                                        $979,289          $461,041
                                                  ========          ========

Corporate and other SG&A increased $518,248 from the fiscal 2003 amount which is
the result of the two added operations of retail jewelry and Gem Pak. Corporate
SG&A decreased $51,593, which includes a reduction in professional fees,
principally related to the legal activity regarding Director James G. Gordon,
from $247,265 to $201,683; officer compensation increased $54,500, primarily due
to only a nominal amount being recorded in fiscal 2003; and in fiscal 2003,
assets with a book value of $34,774 were abandoned.

                                       16
<PAGE>

INTEREST EXPENSE

Interest expense may be summarized as follows:

                                                      2004             2003
                                                      ----             ----

Related party interest                         $     146,715    $     222,700
Other interest                                        57,622          101,953
                                               -------------    -------------
     Total                                     $     204,337    $     324,653
                                               =============    =============

The loans outstanding were renewed during fiscal 2004 and fiscal 2003, and the
Company's common stock was issued as fees to induce the parties to renew their
loans. Related party interest expense includes $40,500 and $117,500 in fiscal
2004 and 2003, respectively, of loan fee amortization. Other interest expense
includes $2,500 and $53,200 in fiscal 2004 and 2003, respectively, of loan fee
amortization. Excluding loan fee amortization, total interest expense increased
$7,384, which is primarily the interest incurred on the new Gem Pak debt of
$4,220.

GOLD CONSIGNMENT FEE

The gold consignment fee charged by the gold lender for HMS during fiscal 2004
was $137,752 and amounted to $187,296 during fiscal 2003. The decrease is
attributed to a lower level of consigned inventory due primarily to HMS reducing
its consigned inventory to reduce carrying costs.

UNREALIZED (GAIN) LOSS ON MARKETABLE SECURITIES

The Company recognized an unrealized gain in the amount of $85,067 and an
unrealized loss in the amount of $3,521 on their investment in trading
securities in fiscal 2004 and 2003, respectively.

GOODWILL IMPAIRMENT

The Company completed an impairment test of its goodwill during the fourth
quarter. Based upon the test results, the Company recorded an impairment of
$1,988,426.

LITIGATION SETTLEMENT

The Company has accrued $1,000,000 as an estimate of the cost to settle its
lawsuit with Lakewood.

LOSS ON SALE OF ASSETS

The Company recorded a loss of $69,783 from the sale of their remaining trading
equity securities in fiscal 2004. In addition, the Company also recorded a loss
of $3,725 from abandonment of certain assets at their closed jewelry stores.

                                       17
<PAGE>

INCOME TAXES

The Company recorded no income tax benefit from continuing operations in fiscal
2004 and $89,200 in fiscal 2003. The benefit recorded was net of a deferred tax
valuation allowance of $1,210,800 and $20,500 in fiscal 2004 and 2003,
respectively.

DISCONTINUED OPERATIONS

The loss from discontinued operations in fiscal 2003 of $2,114,762 includes a
loss from operations of $796,082 from Tandori, a loss from operations of
$1,228,731 from Silver, a net gain on disposal of $117,551 and a deferred income
tax charge of $207,500.


NEW ACCOUNTING STANDARDS

In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," ("SAB 104") which supersedes SAB 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). SAB 104's primary purpose is
to rescind accounting guidance contained in SAB 101 related to multiple element
revenue arrangements, superseded as a result of the issuance of Emerging Issues
Task Force ("EITF") 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." EITF 00-21 addresses certain aspects of the accounting by a
vendor for arrangements under which it will perform multiple revenue-generating
activities.

Specifically, EITF 00-21 addresses whether an arrangement contains more than one
unit of accounting and the measurement and allocation to the separate units of
accounting in the arrangement. Additionally, SAB 104 rescinds the SEC's "Revenue
Recognition in Financial Statements Frequently Asked Questions and Answers"
issued with SAB 101 that had been codified in SEC Topic 13. The revenue
recognition principles of SAB 101 remain largely unchanged by the issuance of
SAB 104. The adoption of SAB 104 and EITF 00-21 did not have a material effect
on our financial condition or results of operations.

FOURTH QUARTER ADJUSTMENTS

During the fourth quarter the Company performed an impairment test of its
goodwill and calculated an impairment of $1,988,426. The Company accrued
$1,000,000 as an estimate of its cost to settle the lawsuit with Lakewood.

                                       18
<PAGE>

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. For example, unexpected changes in
market conditions or a downturn in the economy could adversely affect actual
results. Estimates are used in accounting for, among other things, inventory
obsolescence, goodwill valuation, retail inventory method, legal liability,
product warranty, depreciation, employee benefits, taxes, and contingencies.
Estimates and assumptions are reviewed periodically and the effects of revisions
are reflected in the consolidated financial statements in the period they are
determined to be necessary.

Management believes the following critical accounting policies, among others,
affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements.

Merchandise Inventories - Merchandise inventories are stated at the lower of
cost or market. All gold inventories are valued at cost using the average cost
method.

The Company also writes down its inventory for discontinued, slow-moving and
damaged inventory. This write-down is equal to the difference between the cost
of inventory and its estimated market value based upon assumptions of targeted
inventory turn rates, future demand, management strategy, and market conditions.
If actual market conditions are less favorable than those projected by
management or management strategy changes, additional inventory write-downs may
be required and, in the case of a major change in strategy or downturn in market
conditions, such write-downs could be significant.

HMS does a complete physical count of its inventory each month by using daily
cycle counts.

Long-lived Assets and Goodwill - Long-lived assets are periodically reviewed for
impairment by comparing the carrying value of the assets with their estimated
fair values. If the evaluation indicates that the carrying amount of the asset
may not be recoverable, the potential impairment is measured based on a
projected discounted cash flow method, using a discount rate that is considered
to be commensurate with the risk inherent in the Company's current business
model. Assumptions are made with respect to cash flows expected to be generated
by the related assets based upon updated projections. Any changes in key
assumptions or market conditions could result in an unanticipated impairment
charge. Any impairment would be recognized in operating results if a permanent
reduction were to occur.

Goodwill, which represents the cost in excess of fair value of net assets
acquired, is subject to an impairment test on an annual basis, or when there is
reason to believe that the value has been diminished or impaired. The fair value
of the Company's identified reporting unit was estimated using the expected
present value of corresponding future cash flows and market values of comparable
businesses where available.

                                       19
<PAGE>

REVENUE RECOGNITION - The Company recognizes revenue in accordance with the
Securities and Exchange Commissions Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). Revenue related to merchandise
sales is recognized at the time of the sale, reduced by a provision for returns.
The provision for sales returns is based on historical evidence of the Company's
return rate.

INCOME TAXES - Income taxes are estimated for each jurisdiction in which the
Company operates. This involves assessing the current tax exposure together with
temporary differences resulting from differing treatment of items for tax and
accounting purposes. Any resulting deferred tax assets are evaluated for
recoverability based on estimated future taxable income. To the extent that
recovery is deemed not likely, a valuation allowance is recorded.


                                       20
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

The Consolidated Financial Statements of SGD Holdings, LTD and Subsidiaries,
together with the report thereon of Guest & Company, P.C. dated October 29,
2004, for the years ended July 31, 2004 and 2003, is set forth as follows:

                   Index to Consolidated Financial Statements

                                                                           Page
                                                                            No.
                                                                            ---

Independent Auditors' Report                                               22-23
Consolidated Balance Sheet                                                  24
Consolidated Statements of Operations                                       25
Consolidated Statements of Stockholders' Equity                             26
Consolidated Statements of Cash Flows                                      27-28
Notes to Consolidated Financial Statements                                 29-47







                                       21
<PAGE>

                              GUEST & COMPANY, P.C.
                         7170 S. BRADEN AVE., SUITE 100
                           TULSA, OKLAHOMA 74136-6333
                      PHONE: 918-481-5355 FAX: 918-481-5771

                          INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
SGD Holdings, Ltd. and Subsidiaries
Addison, Texas

We have audited the accompanying consolidated balance sheet of SGD Holdings,
Ltd. and Subsidiaries (the "Company") as of July 31, 2004, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years ended July 31, 2004 and 2003. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of SGD
Holdings, Ltd. and Subsidiaries as of July 31, 2004, and the consolidated
results of their operations and their consolidated cash flows for the years
ended July 31, 2004 and 2003, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in note 16 to the
consolidated financial statements, the Company has experienced a significant
working capital reduction as of July 31, 2004, and does not have sufficient cash
flows to meet its obligations currently due. In addition, the Company suffered a
significant loss in fiscal year 2004, as well as the prior two years, and has


                                       22
<PAGE>

significant obligations which are currently due. The Company is also a defendant
in two lawsuits, the outcome of which could have a substantial negative impact
on the Company. In addition, the Company is in violation of a restrictive
covenant related to its gold consignment agreement, for which a requested waiver
has not been obtained. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in note 16. The consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.


                            /s/ Guest & Company, P.C.



October 29, 2004
Tulsa, Oklahoma


                                       23
<PAGE>

SGD HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JULY 31, 2004
--------------------------------------------------------------------------------

ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                         $   695,144
  Accounts receivable, net of allowance of $61,752                    1,152,660
  Inventory                                                           2,452,463
  Prepaid expenses and other assets                                     199,626
  Due from related parties                                               20,711
  Deferred income taxes                                                  26,900
                                                                    ------------
          Total current assets                                        4,547,504

Property and equipment, net                                             291,306
Marketable investment securities                                          7,100
Deposits                                                                 32,800
Deferred income taxes                                                   163,700
Goodwill, net                                                         1,796,768
                                                                    ------------
                                                                    $ 6,839,178
                                                                    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Notes payable                                                     $ 1,098,198
  Notes payable due related parties                                   1,350,488
  Accounts payable                                                      488,787
  Accrued expenses                                                    1,205,445
  Due to related parties                                                220,226
                                                                    ------------
          Total current liabilities                                   4,363,144
                                                                    ------------
Minority interest                                                            --
Commitments and contingencies

STOCKHOLDERS' EQUITY
  Common stock, $.0001 par value.  Authorized 200,000,000 shares;
    issued and outstanding 45,666,824 shares                              4,567
  Paid-in capital                                                     9,920,634
  Deficit                                                            (7,170,417)
  Accumulated other comprehensive income (loss)                        (278,750)
                                                                    ------------
Total stockholders' equity                                            2,476,034
                                                                    ------------
                                                                    $ 6,839,178
                                                                    ============

See accompanying notes to consolidated financial statements.

                                       24
<PAGE>
<TABLE>

SGD HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31, 2004 AND JULY 31, 2003
----------------------------------------------------------------------------------------


                                                            2004                2003
                                                            ----                ----
<S>                                                     <C>                <C>
SALES AND REVENUES                                      $ 12,977,574       $ 13,422,192
COST OF SALES                                              9,680,269         10,083,982
                                                        -------------      -------------
GROSS PROFIT                                               3,297,305          3,338,210
  Selling, general and administrative expense              3,558,594          3,160,470
                                                        -------------      -------------
EARNINGS (LOSS) FROM OPERATIONS                             (261,289)           177,740

OTHER (INCOME) EXPENSE:
  Interest expense                                            57,622            101,953
  Interest expense - related parties                         146,715            222,700
  Gold consignment fee                                       137,752            187,296
  Unrealized (gain) loss on marketable securities            (85,067)             3,521
  Interest and other income                                   (7,735)            (5,197)
  Goodwill impairment                                      1,988,426                 --
  Litigation settlement estimate                           1,000,000                 --
  Loss on sale of assets                                      73,508                 --
                                                        -------------      -------------
                                                           3,311,221            510,273
                                                        -------------      -------------
LOSS FROM CONTINUING OPERATIONS BEFORE
  INCOME TAXES                                            (3,572,510)          (332,533)
INCOME TAX BENEFIT                                                --            (89,200)
                                                        -------------      -------------
LOSS FROM CONTINUING OPERATIONS                           (3,572,510)          (243,333)
DISCONTINUED OPERATIONS:
  LOSS FROM OPERATIONS OF DISCONTINUED OPERATIONS
    INCLUDING GAIN ON DISPOSAL OF $117,551 IN 2003                --         (1,907,262)
  INCOME TAX EXPENSE                                              --            207,500
                                                        -------------      -------------
    LOSS ON DISCONTINUED OPERATIONS                               --         (2,114,762)
                                                        -------------      -------------
NET LOSS BEFORE MINORITY INTEREST                         (3,572,510)        (2,358,095)
                                                        -------------      -------------
MINORITY INTEREST                                                200                 --
                                                        -------------      -------------
     NET LOSS                                           $ (3,572,310)      $ (2,358,095)
                                                        =============      =============

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
  CONTINUING OPERATIONS                                 $      (0.09)      $      (0.01)
  DISCONTINUED OPERATIONS                                         --              (0.07)
                                                        -------------      -------------
                                                        $      (0.09)      $      (0.08)
                                                        =============      =============

WEIGHTED AVERAGE SHARES OUTSTANDING                       40,421,591         31,379,228
                                                        =============      =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                            25
<PAGE>
<TABLE>

SGD HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 2004 AND JULY 31, 2003
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Accumulated
                                                                                      Retained          Other
                                             Common Stock              Paid-in        Earnings       Comprehen-
                                         Shares       Par Value        Capital       (Deficit)      sive Income         Total
                                        ------------   ------------   ------------   ------------    ------------    ------------
<S>                                      <C>           <C>            <C>            <C>             <C>             <C>
BALANCE, July 31, 2002                   28,166,077    $     2,817    $ 9,406,677    $(1,240,012)    $  (140,500)    $ 8,028,982
Common shares issued to
  related parties:
    Loan and guaranty fees                3,100,000            310        154,690             --              --         155,000
    Settlement                            1,000,000            100         49,900             --              --          50,000
Common shares sold for cash               4,000,000            400        199,600             --              --         200,000
Comprehensive income:
  Unrealized loss on available-for-
    sale securities, net                         --             --             --             --        (128,850)       (128,850)
  Net loss                                       --             --             --     (2,358,095)             --      (2,358,095)
                                        ------------   ------------   ------------   ------------    ------------    ------------
      Total comprehensive income                 --             --             --     (2,358,095)       (128,850)     (2,486,945)
                                        ------------   ------------   ------------   ------------    ------------    ------------
BALANCE, July 31, 2003                   36,266,077          3,627      9,810,867     (3,598,107)       (269,350)      5,947,037
                                        ------------   ------------   ------------   ------------    ------------    ------------
Common shares issued:
  To related parties for accounts
   payable                                5,000,000            500         49,500             --              --          50,000
  For accrued interest                    1,210,746            121         11,986             --              --          12,107
  For loan extension fees                   550,000             55          5,445             --              --           5,500
  To acquire Gem Pak, Inc.                  100,000             10          4,990             --              --           5,000
  For cash                                2,540,001            254         37,846             --              --          38,100
Comprehensive income:
    Unrealized loss on available-for
      sale securities, net                       --             --             --             --          (9,400)         (9,400)
    Net loss                                     --             --             --     (3,572,310)             --      (3,572,310)
                                        ------------   ------------   ------------   ------------    ------------    ------------
      Total comprehensive income                 --             --             --     (3,572,310)         (9,400)     (3,581,710)
                                        ------------   ------------   ------------   ------------    ------------    ------------
BALANCE, July 31, 2004                   45,666,824    $     4,567    $ 9,920,634    $(7,170,417)    $  (278,750)    $ 2,476,034
                                        ============   ============   ============   ============    ============    ============

</TABLE>

See accompanying notes to consolidated financial statements.

                                                                26
<PAGE>
<TABLE>

SGD HOLDINGS, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years ended July 31, 2004 and July 31, 2003
----------------------------------------------------------------------------------------------------------


                                                                            2004                2003
                                                                     -----------------   -----------------
<S>                                                                  <C>                 <C>
Cash flows used in operating activities
Net loss                                                             $     (3,572,310)   $     (2,358,095)
  Loss from discontinued operations                                                 -          (2,114,762)
                                                                     -----------------   -----------------
    Loss from continuing operations                                        (3,572,310)           (243,333)
Adjustments to reconcile net loss to net
 cash used in operating activities:
  Depreciation and amortization                                                70,317              70,670
  Deferred income taxes                                                             -             (89,200)
  Goodwill impairment                                                       1,988,426              30,412
  Unrealized (gain) loss on marketable equity securities                      (85,067)              3,521
  Bad debt expense                                                             55,846              88,740
  Proceeds from sale of assets                                                 28,101                   -
  Loss on sale of assets                                                       73,508                   -
  Common stock issued for services and loan fees                                5,500              50,000
  Minority interest                                                              (200)                  -
  Accounts receivable                                                         (19,467)            (43,194)
  Inventory                                                                   (83,911)           (212,624)
  Other assets                                                                160,034             278,303
  Accounts payable                                                            132,960            (408,031)
  Accrued expenses                                                          1,090,656              77,177
                                                                     -----------------   -----------------
Net cash from continuing operations                                          (155,607)           (397,559)
  Net cash used in discontinued operations                                          -            (577,316)
                                                                     -----------------   -----------------
    Net cash used in operations                                              (155,607)           (974,875)
                                                                     -----------------   -----------------

Cash flows used in investing activities
  Capital expenditures                                                       (131,775)           (107,500)
                                                                     -----------------   -----------------
Net cash used in continuing operations                                       (131,775)           (107,500)
  Net cash used in discontinued operations                                          -             (43,753)
                                                                     -----------------   -----------------
    Net cash used in investing activities                                    (131,775)           (151,253)
                                                                     -----------------   -----------------

See accompanying notes to consolidated financial statements.                                   (Continued)

                                                      27
<PAGE>

SGD HOLDINGS, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued
Years ended July 31, 2004 and 2003
--------------------------------------------------------------------------------------------------------
                                                                            2004                2003
                                                                        ------------        ------------
Cash flows provided by financing activities
  Proceeds from sale of common stock                                    $    38,100         $   200,000
  Loan proceeds, related party                                                   --              30,000
  Due to related parties                                                    203,241                  --
  Repayment of long-term debt and notes payable                             (15,380)            (12,876)
  Cash received in excess of cash paid in acquisition of Gem Pak              6,214                  --
  Loans made to Gem Pak prior to acquisition                               (148,477)                 --
                                                                        ------------        ------------
Net cash from continuing operations                                          83,698             217,124
  Net cash from discontinued operations                                          --             651,477
                                                                        ------------        ------------
    Net cash provided by financing activities                                83,698             868,601
                                                                        ------------        ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                  (203,684)           (257,527)
CASH AND CASH EQUIVALENTS, beginning of year                                898,828           1,156,355
                                                                        ------------        ------------
CASH AND CASH EQUIVALENTS, end of year                                  $   695,144         $   898,828
                                                                        ============        ============

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and income taxes are as follows:
  Interest and gold consignment fee                                     $   241,988         $   287,619
  Income taxes                                                                   --                  --

Noncash investing and financing activities are as follows:
Common stock issued for loan and guaranty fees                          $     5,500         $   155,000
Common stock issued for settlement                                               --              50,000
Common stock issued as part of Gem Pak, Inc. acquisition                      5,000                  --
Common stock issued for accounts payable and accrued interest                62,107                  --

</TABLE>

See accompanying notes to consolidated financial statements.

                                                      28
<PAGE>

SGD HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          PRINCIPLES OF CONSOLIDATION AND PRESENTATION
          The consolidated financial statements include the accounts of SGD
          Holdings, Ltd. ("SGD") and its wholly owned subsidiaries HMS Jewelry
          Company, Inc. ("HMS"); Tandori, Inc. ("Tandori"); and Con-Tex Silver
          Imports, Inc. ("Silver"); Jewelry Solutions & Commerce, Inc.
          ("Jewelry") the 100% subsidiary of HMS; Gem Pak, Inc. ("Gem Pak"), the
          80% subsidiary of HMS and Rings N' Things, LLC ("Rings") the 80%
          subsidiary of Jewelry (collectively referred to as the "Company"). All
          material intercompany accounts and transactions have been eliminated.


          ORGANIZATION
          SGD was incorporated on May 22, 1996, in Delaware as Transun
          International Airways, Inc. and until June 1999, was a development
          stage company with plans to establish itself as an air transport
          company providing non-scheduled air service (charter flights) for tour
          operators, charter brokers, cruise line casinos, theme parks and theme
          attractions. Transun International Airways, Inc. changed its name to
          Goldonline International, Inc. on June 10, 1999. Goldonline
          International, Inc. changed its name to SGD Holdings, Ltd. on January
          24, 2001.

          On April 20, 2000, pursuant to an agreement and plan of reorganization
          dated April 11, 2000, SGD acquired 100% of the issued and outstanding
          common stock of Benton Ventures, Inc. ("Benton"), a Delaware
          corporation, in exchange for 1,200,000 newly issued common shares of
          SGD. On April 25, 2000, the Board of Directors of SGD elected to merge
          Benton into SGD pursuant to Section 253 of Delaware's General
          Corporate Laws. As a result of the merger, SGD became the surviving
          company and assumed the reporting responsibilities under successor
          issuer status as more fully detailed in Section 12(g)(3) of The
          Securities Exchange Act of 1934. Benton was a dormant company and its
          assets and liabilities were insignificant.

          Silver was incorporated on September 12, 1994, in Texas. HMS was
          incorporated on October 12, 2000, in Texas. Tandori was incorporated
          on November 9, 1998, in Nevada. Jewelry was incorporated on February
          3, 1999, in Delaware. Gem Pak was incorporated on May 24, 2002, in
          Texas. Rings was incorporated September 2, 2003, in Nevada.

          On June 10, 1999, SGD acquired all of the issued and outstanding
          common stock of Silver and Jewelry. For accounting purposes, the
          acquisitions were treated as the acquisition of Silver and Jewelry by
          SGD with Silver as the acquiror (reverse acquisition). The historical
          financial statements prior to June 10, 1999, are those of Silver.

                                       29
<PAGE>

          Effective October 1, 2000, SGD completed the acquisition of HMS
          Jewelry Co., Ltd., a Texas limited partnership and HMS Operating
          Company, a Texas corporation and transferred the assets acquired and
          liabilities assumed into HMS Jewelry Company, Inc. For accounting
          purposes, the acquisition was treated as a purchase.

          Effective September 1, 2001, SGD completed the acquisition of Tandori,
          Inc. in a transaction treated as a purchase for accounting purposes.

          Jewelry formed Rings and commenced operation of two retail jewelry
          stores during October and November 2003. Jewelry also opened two
          directly owned jewelry stores during November and December 2003. The
          two stores operated by Rings were subsequently closed.

          Effective April 1, 2004, HMS completed the acquisition of 80% of Gem
          Pak in a transaction treated as a purchase for accounting purposes.
          SGD issued 100,000 shares of its common stock for 80% of Gem Pak's
          common stock. Gem Pak sells packaging and display materials to the
          same customer base as HMS.

          DISCONTINUED OPERATIONS
          (a) On April 23, 2003, Silver filed a Voluntary Petition for
          Reorganization under Chapter 11 of Title 11 of the United States Code
          in the United States Bankruptcy Court for the Northern District of
          Texas, Fort Worth Division, Case No. 03-43783-DML-11.

          During the week ended July 25, 2003, management of the Company
          determined to cease operations of Silver. Accordingly, in SGD's next
          scheduled Board of Director's meeting, on August 7, 2003, the Board
          voted to convert the Chapter 11 case to Chapter 7 and all operations
          of Silver were immediately discontinued. The Voluntary Petition for
          Reorganization under Chapter 11 was converted to Chapter 7 on
          September 23, 2003.

          Silver was involved in both the wholesale and retail jewelry
          business, principally silver, with retail locations in Texas. The
          wholesale operation of Silver consisted of sales directly from its
          headquarters in Conroe, Texas, sales from a Dallas location and sales
          from jewelry shows at locations throughout the south central United
          States.

          (b) On July 17, 2003, the Company received an offer to sell the assets
          and business of Tandori, effective July 31, 2003, in exchange for
          assumption of liabilities, excluding payroll taxes. In addition, the
          buyer agreed to pay to SGD up to 50% of any profits the buyer might
          make from the sale of Tandori's assets, up to $1,000,000, if the buyer
          should sell the assets to a third party within three years of the
          acquisition. The Company subsequently approved the offer and the
          operations have been included in discontinued operations for the
          periods presented. The purchaser was a company owned by G. David
          Gordon and the President of Tandori.

                                       30
<PAGE>

          Tandori operated under the LifeStyle Technologies(TM) name as a full
          service home technology integration company providing complete
          installation and equipment for structured wiring, home audio, home
          theater, home security, PC networking, central vacuum, accent lighting
          and other current technology applications.

          NATURE OF BUSINESS
          SGD is a holding company principally engaged in acquiring and
          developing jewelry businesses. HMS is primarily involved in the
          wholesale gold jewelry business. Gem Pak sells packaging and display
          materials, principally to retail jewelry stores. Jewelry currently
          operates two retail jewelry stores.

          CASH EQUIVALENTS
          The Company considers all liquid investments with original maturities
          of three months or less to be cash equivalents. At July 31, 2004, cash
          equivalents consist of money fund investments, money market accounts
          and business checking accounts.

          MARKETABLE INVESTMENT SECURITIES

          Marketable investment securities are classified into the following
          categories:
          o         Trading securities reported at fair value with unrealized
                    gains and losses included in earnings;
          o         Available-for-sale securities reported at fair value with
                    unrealized gains and losses, net of deferred income taxes,
                    reported in other comprehensive income; and
          o         Held-to-maturity securities reported at amortized cost.

         Fair value is determined from quoted market price.

          INVENTORIES
          Inventories consist primarily of gold jewelry and are carried at the
          lower of average cost or market. The inventory is marked down for
          estimated unmarketable inventory equal to the difference between the
          cost of inventory and the estimated market value based upon
          assumptions about future demand and market conditions. Management
          records these inventory markdowns periodically based on the various
          assumptions, including customer demand and preferences.

          The Company satisfies a majority of its gold supply needs through a
          gold consignment agreement with a financial institution that leases
          gold to the Company ("gold lender"). In accordance with the terms of
          the agreements, the Company has the option of repaying the gold lender
          in an equivalent number of ounces of fine gold or cash based upon the
          then quoted London Bullion Brokers' second fixing price.

                                       31
<PAGE>

          PROPERTY AND EQUIPMENT
          Property and equipment are recorded at cost, net of accumulated
          depreciation. Depreciation is calculated by using the straight-line
          method over the estimated useful lives of the assets, which is five to
          seven years for all categories except for computer software, which is
          depreciated over three years. Leasehold improvements are amortized
          over the life of the lease if it is shorter than the estimated useful
          life. Repairs and maintenance are charged to expense as incurred.
          Expenditures for betterments and renewals are capitalized. The cost of
          property and equipment and the related accumulated depreciation are
          removed from the accounts upon retirement or disposal with any
          resulting gain or loss being recorded as other income or expenses.

          GOODWILL
          Goodwill, which represents the cost in excess of fair value of net
          assets acquired, is subject to an impairment test on an annual basis,
          or when there is reason to believe that the value has been diminished
          or impaired. The fair value of the Company's identified reporting
          units was estimated using the expected present value of corresponding
          future cash flows and market values of comparable businesses where
          available. The Company completed the valuations of its reporting unit
          that includes goodwill in fiscal year 2004 and concluded that an
          impairment charge of $1,988,426 was warranted.

          INCOME TAXES
          The Company accounts for income taxes under the provisions of
          Statement of Financial Accounting Standards No. 109, "Accounting for
          Income Taxes" ("SFAS 109"). Under SFAS 109, the liability method is
          used in accounting for income taxes and deferred tax assets and
          liabilities are determined based on differences between the financial
          reporting and tax bases of assets and liabilities. Deferred tax assets
          and liabilities are measured using enacted tax rates expected to apply
          to taxable income in the years in which those temporary differences
          are expected to be recovered or settled. The effect on deferred tax
          assets and liabilities of a change in tax rates is recognized in
          income in the period that includes the enactment date.

          REVENUE AND COST RECOGNITION
          The Company recognizes revenue in accordance with the Securities and
          Exchange Commissions Staff Accounting Bulletin No. 101, "Revenue
          Recognition in Financial Statements" (SAB 101). Revenue related to
          merchandise sales is recognized at the time of the sale, reduced by a
          provision for returns. The provision for sales returns is based on
          historical evidence of the Company's return rate.

          ADVERTISING EXPENSES
          Advertising expenses are charged against operations when incurred and
          are a component of selling, general and administrative expense in the
          consolidated statements of operations. Amounts charged against
          operations were $46,115 in fiscal 2004 and $120,407 in fiscal 2003.

                                       32
<PAGE>

          CATALOG COSTS
          Catalog costs are charged to expense as incurred, the only exception
          being major catalog revisions. Costs capitalized are amortized over a
          maximum of two years. At July 31, 2004, there was $99,530 in
          unamortized catalog revision costs capitalized.

          SHIPPING AND HANDLING COSTS
          Shipping and handling costs billed to customers are recorded as
          revenue. The costs associated with shipping goods to customers are
          recorded as a selling expense. Shipping expenses, which include only
          third party costs of shipping, for the years ended July 31, 2004 and
          July 31, 2003, were $303,603 and $314,900, respectively.

         STOCK OPTION PLANS
          The Company accounts for stock-based awards to employees using the
          intrinsic value method described in Accounting Principles Board
          Opinion (APB) No. 25, "Accounting for Stock Issued to Employees" and
          its related interpretations. Accordingly, no compensation expense has
          been recognized in the accompanying consolidated financial statements
          for stock-based awards to employees when the exercise price of the
          award is equal to or greater than the quoted market price of the stock
          on the date of the grant.

          SFAS 123, "Accounting for Stock-Based Compensation" and SFAS 148,
          "Accounting for Stock-Based Compensation - Transition and Disclosure -
          an amendment of SFAS 123" require disclosures as if the Company had
          applied the fair value method to employee awards rather than the
          intrinsic value method. The fair value of stock-based awards to
          employees is calculated through the use of option pricing models,
          which were developed for use in estimating the fair value of traded
          options, which have no vesting restrictions and are fully
          transferable. These models also require subjective assumptions,
          including future stock price volatility and expected time to exercise,
          which greatly affect the calculated values. No awards were granted
          during fiscal 2004 or fiscal 2003. Accordingly, since there is no
          difference, no disclosure is required of the fair value method as
          compared to the intrinsic value method.

          Options and warrants issued to non-employees are accounted for under
          SFAS 123, "Accounting for Stock Based Compensation." For the options
          and warrants issued to non-employees, the fair value of each award is
          calculated using the Black-Scholes Model in accordance with SFAS 123.

          NET EARNINGS (LOSS) PER SHARE
          The Company has adopted SFAS No. 128 which establishes standards for
          computing and presenting earnings per share (EPS) for entities with
          publicly held common stock. The standard requires presentation of two
          categories of EPS - basic EPS and diluted EPS. Basic EPS excludes
          dilution and is computed by dividing income available to common
          stockholders by the weighted-average number of common shares
          outstanding for the year. Diluted EPS reflects the potential dilution
          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. All potential dilutive securities are antidilutive for fiscal
          2004 and 2003. Accordingly, basic and diluted EPS are the same for
          each period.

                                       33
<PAGE>

          USE OF ESTIMATES
          The process of preparing consolidated financial statements in
          conformity with accounting principles generally accepted in the Unites
          States of America requires the use of estimates and assumptions
          regarding certain types of assets, liabilities, revenues and expenses.
          Such estimates primarily relate to unsettled transactions and events
          as of the date of the consolidated financial statements. Accordingly,
          upon settlement, actual results may differ from estimated amounts.

          FAIR VALUE DETERMINATION
          Financial instruments consist of cash, cash investments, accounts
          receivable, accounts payable, accrued liabilities, notes payable and
          long-term debt. The carrying amount of these financial instruments
          approximates fair value due to their short-term nature or the current
          rates which the Company could borrow funds with similar remaining
          maturities.

          RECENT ACCOUNTING PRONOUNCEMENTS
          In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No.
          104, "Revenue Recognition," ("SAB 104") which supersedes SAB 101,
          "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 104's
          primary purpose is to rescind accounting guidance contained in SAB 101
          related to multiple element revenue arrangements, superseded as a
          result of the issuance of Emerging Issues Task Force ("EITF") 00-21,
          "Accounting for Revenue Arrangements with Multiple Deliverables." EITF
          00-21 addresses certain aspects of the accounting by a vendor for
          arrangements under which it will perform multiple revenue-generating
          activities.

          Specifically, EITF 00-21 addresses whether an arrangement contains
          more than one unit of accounting and the measurement and allocation to
          the separate units of accounting in the arrangement. Additionally, SAB
          104 rescinds the SEC's "Revenue Recognition in Financial Statements
          Frequently Asked Questions and Answers" issued with SAB 101 that had
          been codified in SEC Topic 13. The revenue recognition principles of
          SAB 101 remain largely unchanged by the issuance of SAB 104. The
          adoption of SAB 104 and EITF 00-21 did not have a material effect on
          our financial condition or results of operations.

          RECLASSIFICATIONS
          Certain reclassifications were made to the prior year's consolidated
          financial statements to conform to the current year's presentation.

                                       34
<PAGE>

2.        DISCONTINUED OPERATIONS

          (a) On April 23, 2003, Silver filed a Voluntary Petition for
          Reorganization under Chapter 11 of Title 11 of the United States Code
          in the United States Bankruptcy Court for the Northern District of
          Texas, Fort Worth Division, Case No. 03-43783-DML-11.

          During the week ended July 25, 2003, management of the Company
          determined to cease operation of Silver. Accordingly, in SGD's next
          scheduled Board of Director's meeting, on August 7, 2003, the Board
          voted to convert the Chapter 11 case to Chapter 7 and all operations
          of Silver were immediately discontinued. The Voluntary Petition for
          Reorganization under Chapter 11 was converted to Chapter 7 on
          September 23, 2003.

          Silver was involved in both the wholesale and retail jewelry business,
          principally silver, with retail locations in Texas. The wholesale
          operation of Silver consisted of sales directly from its headquarters
          in Conroe, Texas, sales from a Dallas location and sales from jewelry
          shows at locations throughout the south central United States.

          (b) On July 17, 2003, the Company received an offer to acquire the
          assets and business of Tandori, effective July 31, 2003, in exchange
          for assumption of liabilities, excluding payroll taxes. In addition,
          the buyer agreed to pay to SGD up to 50% of any profits the buyer
          might make from the sale of Tandori's assets, up to $1,000,000, if the
          buyer should sell the assets to a third party within three years of
          the acquisition. The Company subsequently approved the offer and the
          operations have been included in discontinued operations for the
          periods presented. The purchaser was a company owned by G. David
          Gordon and the President of Tandori.

          Tandori operated under the LifeStyle Technologies(TM) name as a full
          service home technology integration company providing complete
          installation and equipment for structured wiring, home audio, home
          theater, home security, PC networking, central vacuum, accent lighting
          and other current technology applications.

                                       35
<PAGE>

          The following summarizes the results of operations of the disposal
          group (unaudited):

                                                                     2003
                                                                     ----
          Revenues:
            Tandori                                           $       3,645,218
            Silver                                                    1,573,728
                                                              ------------------
          Total revenue                                       $       5,218,946
                                                              ==================
          Net loss before income taxes:
            Tandori                                           $         796,082
            Silver                                                    1,228,731
            Gain on disposal                                           (117,551)
                                                              ------------------
              Net loss before income taxes                    $       1,907,262
                                                              ==================

3.        MARKETABLE INVESTMENT SECURITIES

          The following summarizes the Company's investment in securities at
          July 31, 2004:

                  Available-for-sale securities:
                           Cost                                 $     429,550
                           Unrealized loss                           (422,450)
                                                                --------------
                             Fair value                         $       7,100
                                                                ==============

          The Company included in operations $85,067 in unrealized gains and
          $3,521 in unrealized losses during fiscal 2004 and fiscal 2003,
          respectively. During fiscal 2004, the Company sold its remaining
          trading securities with a cost of $93,581 for $23,798 and recognized a
          loss of $69,783. The Company did not sell any of their marketable
          investment securities during fiscal 2003.

          On July 20, 2001, the Company completed the acquisition of 355,000
          shares of the common stock of Premier Concepts, Inc. ("Premier") in
          exchange for 965,000 shares of its common stock. The Company used the
          July 31, 2001 closing market price as quoted on the Nasdaq Stock
          Market to value the transaction.

          The shares of common stock of Premier are "restricted securities"
          under Rule 144. The Company's investment represents 7.9% of the
          outstanding stock of Premier at July 31, 2004. Accordingly, the
          Company is subject to certain restrictions on the number of shares it
          can sell and its required holding period. The Company has classified
          its investment in Premier as available-for-sale securities as a result
          of the Company's intention to hold the securities indefinitely
          pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt
          and Equity Securities."

                                       36
<PAGE>

          Unrealized gains and losses based on fluctuations in the market value
          of available-for-sale securities are included in other comprehensive
          income as an adjustment to equity. The following unrealized losses
          have been recorded in stockholders' equity as accumulated other
          comprehensive income (loss).

<TABLE>
                                                          2004                2003      CUMULATIVE

<S>                                                <C>                <C>               <C>
            Unrealized loss                        $       14,200     $      195,250    $       422,450
            Deferred income taxes                           4,800             66,400            143,700
                                                   --------------     --------------    ---------------
              Other comprehensive loss             $        9,400     $      128,850    $       278,750
                                                   ==============     ==============    ===============
</TABLE>


          Due to the limited market for Premier common stock, it is likely that
          only limited quantities of the stock will be able to be sold in the
          open market. As a result of these restrictions and the probable
          limited trading volume, the Company believes the fair value of the
          investment might be less than the recorded value required by SFAS No.
          115 and that there can be no assurance the Company will realize the
          recorded value of its investment in Premier. On October 10, 2003,
          Premier filed a Voluntary Petition for Reorganization under Chapter 11
          of Title 11 of the United States Code in the United States Bankruptcy
          Court for the Central District of California, Los Angeles Division;
          Case No. LA 03-36445 BR.

4.        INVENTORIES

          Inventories at July 31, 2004, consist of:

                  Inventory, principally gold jewelry       $        5,821,673
                  Less consigned gold                               (3,369,210)
                                                            -------------------
                    Net inventories                         $        2,452,463
                                                            ===================

          At July 31, 2004, inventories excluded 8,608.1 ounces of gold on
          consignment.

5.        PROPERTY AND EQUIPMENT

          Property and equipment consists of the following at July 31, 2004:

                  Office and computer equipment                 $     174,007
                  Furniture and fixtures                              195,426
                  Software                                            113,225
                  Leasehold improvements                               32,838
                                                                --------------
                                                                      515,496
                  Less accumulated depreciation                      (224,190)
                                                                --------------
                                                                $     291,306
                                                                ==============


                                       37
<PAGE>

6.        NOTES PAYABLE

          Notes payable at July 31, 2004, consists of the following:
<TABLE>
<S>                                                                                   <C>
                  Note payable to a bank with monthly payments of $4,658,
                  including interest at 5.25%; balance due December 10, 2004;
                  guaranteed by the President of Gem Pak; collateralized by
                  bonds owned by an individual who is also a personal guarantor                263,198

                  Note payable to a company; due July 31, 2004;
                  interest payable monthly at 5.8% (a)                                         835,000
                                                                                      ----------------

                    Total notes payable                                               $      1,098,198
                                                                                      ================

          (a) Convertible into common stock at the lesser of $.015 per share or
          the market price, limited to 9.9% of the total outstanding shares of
          the Company at the time of conversion. All of the issued and
          outstanding common stock of HMS is collateral on the note, in second
          position behind the collateral position of the note due the president
          of HMS and the note is guaranteed by G. David Gordon. In the event of
          default on any of the loans secured by the HMS common stock, the
          lender has the option to purchase HMS for $5,000,000. On January 28,
          2004, the Company issued 250,000 shares of its common stock as a loan
          extension fee and issued 1,210,746 shares of its common stock for
          $12,107 in accrued interest.

7.        NOTES PAYABLE DUE RELATED PARTIES

          Notes payable due related parties consists of the following at July
          31, 2004:

                  Note payable to the president of HMS, due on July 31, 2004;
                  interest payable monthly at 8%; collateralized by the common
                  stock of HMS; guaranteed by G. David Gordon; convertible into
                  common stock of the Company at $.01 per share, limited to 9.9%
                  of the total outstanding shares of the Company at the time;
                  with anti-dilution rights                                           $      1,250,000

                  Note payable to G. David Gordon, CEO of HMS, a shareholder and
                  the brother of a Director of the Company; due on July 31, 2005
                  with interest payable monthly at 6%; collateralized by the
                  common stock of HMS in third position behind the other notes
                  above; all principal and accrued interest convertible into
                  common stock of the Company at $.01 per share at any time
                  after July 31, 2005; and all shares have anti-dilution rights                100,488
                                                                                      ----------------
                    Total notes payable due related parties                           $      1,350,488
                                                                                      ================
</TABLE>
                                       38
<PAGE>

          The Company issued the president of HMS 300,000 shares of its common
          stock as a loan extension fee on January 28, 2004.


8.        GOLD CONSIGNMENT AND LINE OF CREDIT AGREEMENT

          HMS has a gold consignment agreement with a gold lender. Under the
          terms of the agreement, HMS is entitled to lease the lesser of an
          aggregate amount of 13,200 ounces, or an aggregate consigned gold
          value not to exceed $4,950,000, less any balance outstanding on its
          $1,500,000 line of credit. Title to such consigned gold remains with
          the gold lender until HMS purchases the gold. However, during the
          period of consignment, the entire risk of loss, damage or destruction
          of the gold is borne by HMS. The purchase price per ounce is based on
          the daily Second London Gold Fix. HMS pays the gold consignor a
          consignment fee based upon the dollar value of gold ounces
          outstanding, as defined in the agreement. At July 31, 2004, HMS had
          8,608.1 ounces of gold on consignment with a market value of
          $3,369,210, which was valued at the daily Second London Gold Fix,
          $391.40 per ounce at July 31, 2004, and charged 4.25%.

          Consigned gold is not included in inventory, and there is no related
          liability recorded. As a result of these consignment arrangements, HMS
          is able to shift a substantial portion of the risk of market
          fluctuations in the price of gold to the gold lender, since HMS does
          not purchase gold from the gold lender until receipt of a purchase
          order from, or shipment of jewelry to, its customers.

          The gold lender has also provided a line of credit to HMS in the
          amount of $1,500,000 that is due on demand, including interest at the
          lender's prime rate plus 3/4%. HMS does not have any advances on this
          line of credit at July 31, 2004. During fiscal 2004, HMS borrowed and
          repaid $650,000 on this line of credit and during fiscal 2003, HMS
          borrowed and repaid $950,000 on this line of credit.

          Payment for the consigned gold and the line of credit is secured by
          substantially all property of HMS including its cash, accounts
          receivable, inventory and equipment, the personal guarantee of the CEO
          of HMS and the corporate guarantee of SGD.

          The consignment agreement may be terminated by the gold lender upon 60
          days notice. If the gold lender were to terminate its existing gold
          consignment agreement, HMS does not believe it would experience an
          interruption of its gold supply that would materially adversely affect
          its business. HMS believes that other consignors would be willing to
          enter into similar arrangements should its gold lender terminate its
          relationship with the company.

                                       39
<PAGE>

          The consignment agreement contains restrictive covenants relating to
          maximum usage, net worth, working capital and other financial ratios
          and the agreement requires HMS to own a specific amount of gold at all
          times. Management believes that HMS is in compliance with all
          covenants of the consignment agreement, except one, for which HMS has
          requested a waiver of the covenant from the gold lender.


9.        INCOME TAXES

          Income tax benefit from continuing operations for the years ended July
          31, 2004 and 2003, consists of:
<TABLE>
                                                               2004              2003
                                                               ----              ----

<S>                                                      <C>               <C>
          Current                                        $           -     $          -
          Deferred                                                   -           (89,200)
                                                         --------------    --------------
            Total                                        $           -     $     (89,200)
                                                         ==============    ==============

         Actual income tax benefit applicable to loss before income taxes from
         continuing operations is reconciled with the "normally expected"
         federal income tax benefit for the years ended July 31, 2004 and 2003,
         as follows:

                                                                 2004               2003
                                                                 ----               ----

          Normally expected income tax benefit           $     (1,214,700)   $      (113,100)
          Deferred tax asset valuation allowance                1,210,800             20,500
          Non-deductible items and other                            3,900              3,400
                                                         -----------------   ----------------
                                                         $             -     $       (89,200)
                                                         =================   ================


          The deferred income tax assets and liabilities at July 31, 2004, are
          comprised of the following:

                                                                CURRENT         NONCURRENT
                                                                -------         ----------

          Allowance for bad debts and returns             $        21,000    $            -
          Net operating loss carryforwards                      1,995,400                 -
          Intercompany profit                                      11,500                 -
          Goodwill                                                     -             444,700
          Marketable securities allowance                              -             143,700
                                                          ---------------    ----------------
                                                                2,027,900            588,400
          Valuation allowance                                  (2,001,000)          (412,400)
                                                          ----------------   ----------------
              Deferred income tax assets                           26,900            176,000
          Deferred income tax liability - asset basis                  -             (12,300)
                                                          ----------------   ----------------
              Net deferred income tax assets              $        26,900    $       163,700
                                                          ================   ================
</TABLE>

                                       40
<PAGE>

          The Company has available net operating loss carryforwards in the
          amount of $5,863,000, which expire between 2020 and 2024.


10.       RELATED PARTY TRANSACTIONS

          HMS leases its facility from HMS Leasing Company, LLC, at the rate of
          $8,075 per month pursuant to a lease agreement that expires on October
          31, 2010. This amounted to $96,900 in rent expense during fiscal 2004
          and fiscal 2003. HMS Leasing Company, LLC is owned by the president of
          HMS. HMS is a guarantor of the loan obligation of HMS Leasing Company,
          LLC on the facility, which has a balance of $500,766 at July 31, 2004.

          See Note 7 for details of the $1,350,488 in note obligations to
          related parties.

          At July 31, 2004, amounts due from related parties include the
          following:

                  Premier Concepts, Inc.                     $           13,124
                  President of HMS                                        7,587
                                                             ------------------

                  Total                                      $           20,711
                                                             ==================

          At July 31, 2004, the Company had made net advances of $7,587 to the
          president of HMS, including companies owned by him. The president of
          HMS was issued 300,000 common shares and 1,100,000 common shares
          during fiscal 2004 and 2003, respectively, in exchange for extending
          the $1,250,000 note obligation due him.

          The Company has made net sales to Premier of $21,637 and $95,997
          during fiscal 2004 and fiscal 2003, respectively, and has net
          receivables from Premier at July 31, 2004, of $13,124. The Company
          owns 7.9% of the stock of Premier at July 31, 2004, and the Chief
          Executive Officer of Premier is a Director and acting CEO of the
          Company. On October 10, 2003, Premier filed a Voluntary Petition for
          Reorganization under Chapter 11 of Title 11 of the United States Code
          in the United States Bankruptcy Court for the Central District of
          California, Los Angeles Division; Case No. LA 03-36445 BR. The Company
          reduced its receivable from Premier to the amount they estimate is
          collectible and recorded a write-down of $22,345 on July 31, 2004,
          which was in addition to the $70,000 write-down recorded in fiscal
          2003.

          At July 31, 2004, amounts due to related parties include the
          following:

                  G. David Gordon                                 $     132,430
                  Terry Washburn                                         27,132
                  BJB Services, Inc.                                     55,238
                  President of Gem Pak                                    5,426
                                                                  -------------

                       Total                                      $     220,226
                                                                  =============

                                       41
<PAGE>


          At July 31, 2004, the Company owed G. David Gordon, CEO of HMS, a
          shareholder and the brother of a Director, $132,430 in addition to a
          $100,488 note obligation. The $132,430 includes accrued compensation
          in the amount of $75,000 which is payable in SGD common stock. During
          fiscal 2003, G. David Gordon was issued 2,000,000 common shares for
          issuing his personal guarantee on the Company's obligation to the gold
          lender and the Company's $835,000 note obligation. G. David Gordon
          also received 1,000,000 shares pursuant to a settlement agreement with
          the Company.

          A company owned by G. David Gordon and the President of Tandori
          acquired the assets and assumed substantially all liabilities of
          Tandori effective July 31, 2003. The Company realized a gain of
          $233,169 on the transaction in fiscal 2003, which is included in
          discontinued operations.

          Terry Washburn, President of SGD and a stockholder, was owed $27,132
          at July 31, 2004, which is primarily for accrued compensation. Mr.
          Washburn was issued 1,500,000 shares of SGD common stock during fiscal
          2004, in exchange for $15,000 which was due him.

          BJB Services, Inc., a shareholder, and another company controlled by
          the principal of BJB were owed $55,238 at July 31, 2004, for financial
          services rendered. BJB was issued 3,500,000 shares of SGD common stock
          during fiscal 2004, in exchange for $35,000 which SGD owed BJB.

          The President and 20% owner of Gem Pak was owed $5,426 at July 31,
          2004.


11.       CAPITAL STOCK

                                  COMMON STOCK

          The Company has 200,000,000 shares of common stock (par value $.0001)
          authorized and 45,666,824 shares issued and outstanding at July 31,
          2004.

          During fiscal 2004, the Company had the following stock transactions,
          all of which are "restricted securities" which may be sold only in
          compliance with Rule 144 of the Securities Exchange Act:

          1.        Issued 5,000,000 shares of its common stock to related
                    parties in exchange for $50,000 in accounts payable;
          2.        Issued 1,210,746 shares of common stock in exchange for
                    $12,107 in accrued interest;
          3.        Issued 550,000 shares, valued at $5,500, of its common stock
                    (300,000 to a related party) in exchange for extension of
                    loans;
          4.        Issued 100,000 shares, valued at $5,000, of its common stock
                    to acquire 80% of Gem Pak; and
          5.        Issued 2,540,001 shares of its common stock for $38,100 in
                    cash.

                                       42
<PAGE>

          During fiscal 2003, the Company issued to related parties, 3,100,000
          shares of its common stock for loan and guaranty fees associated with
          extending existing loans and credit agreements and issued 1,000,000
          shares of its common stock for a settlement. These non-cash
          transactions were valued at the closing price of the Company's common
          stock on the date of the transactions, $155,000 and $50,000,
          respectively. The Company also sold 4,000,000 shares of its common
          stock in private transactions for $200,000. These shares are
          "restricted securities" and may be sold only in compliance with Rule
          144 of the Securities Exchange Act.

          The Company's consolidated financial statements were restated during
          fiscal 2002 to reflect the correction of an error in the number of
          shares issued in the June 10, 1999, acquisition of Silver and Jewelry.
          On August 12, 1999, the Company had requested that 75,000,000 and
          10,000,000 shares, respectively, be issued for these acquisitions.
          Effective September 10, 1999, the Company reverse-split all of its
          outstanding common stock, one share for each six shares outstanding.
          The above certificates, representing the 85,000,000 shares were issued
          on September 10, 1999, but were not reverse-split, as they should have
          been. Accordingly, the outstanding shares are adjusted downward by
          70,833,331 shares. This adjustment does not change previously reported
          net income (loss).

                                STOCK OPTION PLAN

          On September 1, 1999, the Board of Directors approved the Goldonline
          International, Inc. Stock Option Plan (the "Plan"), which was approved
          by a majority of the shareholders at a meeting on the same date. The
          Company has reserved 10,000,000 shares of common stock for the grant
          of qualified incentive options or non-qualified options to employees
          and directors of the Company and to non-employee directors,
          consultants and advisors and other persons who may perform significant
          services for or on behalf of the Company. Prices for incentive stock
          options must provide for an exercise price of not less than 100% of
          the fair market value of the common stock on the date the options are
          granted unless the eligible employee owns more than 10% of the
          Company's common stock for which the exercise price must be at least
          110% of such fair market value. Non-statutory options must provide for
          an exercise price of not less than 85% of the fair market value.

                                       43
<PAGE>

          On June 1, 2001, and pursuant to the Plan, the Board of Directors of
          the Company granted options to each member of the Board of Directors
          with an exercise price of $1.00 per share. The options expired on June
          1, 2004. The following is a summary of option activity for the two
          years ended July 31, 2004:
<TABLE>
                                                                   OPTIONS OUTSTANDING
                                                                   -------------------
                                                                                    WEIGHTED
                                              OPTIONS                                AVERAGE
                                             AVAILABLE                              EXERCISE
                                             FOR GRANT           OPTIONS             PRICE
                                             ---------           -------             -----

<S>                                           <C>                   <C>             <C>
         Balance, July 31, 2002               9,592,000             300,000         $   1.00
                                         --------------       -------------         --------
         Granted                                      -                   -             -
         Expired                                      -                   -             -
         Exercised                                    -                   -             -
                                         --------------       -------------         --------
         Balance, July 31, 2003               9,592,000             300,000             1.00
                                         --------------       -------------         --------
         Granted                                      -                   -             -
         Expired                                300,000            (300,000)            1.00
         Exercised                                    -                   -             -
                                         --------------       -------------         --------
         Balance, July 31, 2004               9,892,000                   -         $   -
                                         ==============       =============         ========
</TABLE>

          The Black-Scholes option valuation model was developed for use in
          estimating the fair value of traded options that have no vesting
          restrictions and are fully transferable. In addition, option valuation
          models require the input of highly subjective assumptions including
          the expected stock price volatility. Because the Company's employee
          stock options have characteristics significantly different from those
          of traded options, and because changes in the subjective input
          assumptions can materially affect the fair value estimate, in
          management's opinion, the existing models do not necessarily provide a
          reliable single measure of the fair value of the Company's options.

12.       COMMITMENTS AND CONTINGENCIES

          Rent expense amounted to $236,013 and $96,900 during fiscal 2004 and
          fiscal 2003, respectively. Minimum rental commitments under all
          non-cancelable leases with an initial term in excess of one year are
          payable as follows: 2005 - $180,989; 2006 - $184,505; 2007 - $153,761;
          2008 - $100,357; 2009 - $96,900 and thereafter - $121,125.

          HMS is a guarantor of the loan obligation of HMS Leasing Company, LLC
          on the facility, which has a balance of $500,766 at July 31, 2004.

          From time to time during their normal course of operations, the
          Company maintained cash balances in a financial institution which
          exceeded the insurance limits of the Federal Deposit Insurance
          Corporation.

                                       44
<PAGE>

13.       SEGMENT INFORMATION

          The Company reports segments based upon the management approach, which
          designates the internal reporting that is used by management for
          making operating decisions and assessing performance. With the
          disposition of Silver and Tandori, continuing operations currently
          includes only one segment, the wholesale gold operations of HMS.

14.       LEGAL MATTERS

          On December 13, 2002, SGD filed a petition against James G. "Greg"
          Gordon ("Gordon") in the 342nd District Court, Tarrant County, Texas
          alleging breach of fiduciary duty, conversion of corporate funds and
          misappropriation of corporate funds. SGD alleged that Gordon, who was
          President of SGD from June 10, 1999, until November 25, 2002,
          wrongfully and without authority or approval, transferred
          approximately $2.7 million from two separate SGD bank accounts into an
          account or accounts held by Silver. Thereafter, Gordon utilized a
          portion of SGD's funds for his and his family's personal use and
          enjoyment, his personal financial gain and for unauthorized
          transactions on Silver's behalf. SGD was seeking to recover its
          damages, which were in excess of $2.7 million, costs of court and
          pre-judgment interest as allowed by law. SGD dismissed its claim
          against Gordon as it determined the cost would exceed any benefit and
          the funds it saved could be used to pay creditors of the Company;
          however the Company still maintains the right to re-file the lawsuit
          against Gordon.

          On January 3, 2003, James G. Gordon and Lisa K. Gordon ("Plaintiffs")
          filed a petition in the District Court of Montgomery County, Texas,
          Cause No. 03-01-00006-CV against SGD Holdings, Ltd., G. David Gordon
          and David Covey. G. David Gordon is the brother of James G. Gordon and
          David Covey was president of Tandori, a wholly owned and currently
          inactive subsidiary of SGD. Plaintiffs, in their claim asserted
          against SGD, are seeking to declare the one for six stock split, which
          occurred in September 1999, void. If declared void, they claim they
          would presently own 75,000,000 shares of SGD common stock instead of
          11,250,000 shares of SGD common stock as currently reported by the
          Company. In October 2004, James Gordon was able to obtain a temporary
          restraining order in this action which prevents SGD from raising any
          additional equity capital until the trial is completed. Trial in the
          matter is scheduled to commence in the second week of January 2005.
          Management of the Company does not expect to incur any significant
          liability; however, there are a number of unresolved issues which
          could result in liability to the Company.

          In March 2003, Silver filed a petition in the District Court of
          Galveston County, Texas, Cause No. 03CV0316 against Debbie King, the
          sister-in-law of James G. Gordon. Effective October 28, 2002, James G.
          Gordon, the former President of Silver entered into a transaction with
          his sister-in-law whereby he sold the assets of one of the retail
          locations of Silver for cash proceeds of $30,645. The Company recorded
          a loss on the transaction of $51,015 in fiscal 2003. In its claim,


                                       45
<PAGE>

          Silver alleged conspiracy, unjust enrichment and that the sale of the
          retail location is void because of unconscionability. Additionally,
          Silver requested a return of profits received by Defendant. This
          action is currently stayed due to Silver filing a Voluntary Petition
          for Reorganization under Chapter 11 of Title 11 of the United States
          Code on April 23, 2003, as described below.

          On April 23, 2003, SGD's wholly owned subsidiary, Silver filed a
          Voluntary Petition for Reorganization under Chapter 11 of Title 11 of
          the United States Code in the United States Bankruptcy Court for the
          Northern District of Texas, Fort Worth Division, Case No.
          03-43783-DML-11. The reorganization filing was necessitated as a
          result of James G. Gordon, a Director and former President of SGD,
          locking Silver employees out of the office and warehouse premises
          which he owned and leased to Silver, which prevented Silver from
          operating. The Voluntary Petition for Reorganization under Chapter 11
          was converted to Chapter 7 on September 23, 2003.

          On May 2, 2003, Lakewood Development Corporation ("Lakewood") filed a
          petition in the District Court of Tarrant County, Texas, Cause No. 96
          198685 03 against SGD Holdings, Ltd. and James G. Gordon, former
          President of SGD. Lakewood, in its claim asserted against SGD and
          Gordon, alleged fraud in stock transactions under Section 27.01 of the
          Texas Business and Commerce Code, violations of the anti-fraud
          provisions of the Texas Securities Act and common law fraud. In
          addition, Lakewood is alleging breach of fiduciary duty against
          Gordon. Lakewood is seeking restitution of the $7,817,500 which it
          invested in common stock based upon representations made by Gordon,
          together with damages, expenses and interest. Presently, Company
          counsel is negotiating a settlement with Lakewood. The Company has
          accrued $1,000,000 as an estimate of the cost of the settlement.


15.       FOURTH QUARTER ADJUSTMENTS

          During the fourth quarter, the Company performed an impairment test of
          its goodwill and calculated an impairment of $1,988,426. The Company
          accrued $1,000,000 as an estimate of the cost to settle its lawsuit
          with Lakewood.


16.       GOING CONCERN

          At July 31, 2004, the Company's working capital had been reduced to
          $184,360 from the prior year amount of $2,198,989. The Company had a
          net loss of $3,572,310 for fiscal 2004 which included a charge for
          goodwill impairment of $1,988,426 and a charge of $1,000,000 for an
          estimate of the Lakewood litigation settlement (see note 14).
          Accordingly, the Company still incurred a loss of $583,884 in addition
          to the charges above. The Company has two notes payable, in the amount
          of $1,250,000 and $835,000, which are currently past due, and because
          of the temporary restraining order granted to James G. Gordon the
          Company is unable to raise any equity capital. Trial for the
          litigation with James G. Gordon is scheduled to commence during the
          second week of January 2005 (see note 14). In addition, the Company is
          in violation of a restrictive covenant related to its gold consignment
          agreement, for which a requested waiver has not been obtained (see
          note 8). The Company does not have sufficient cash flows to meet its
          obligations currently due within the next 12 months. These conditions
          raise substantial doubt about the Company's ability to continue as a
          going concern.

                                       46
<PAGE>

          If the Company is (i) unable to grow its business or improve its
          operating cash flows as expected, (ii) unsuccessful in extending a
          substantial portion of the debt repayments currently past due, (iii)
          unsuccessful in its litigation with James G. Gordon, (iv) unable to
          raise additional funds through private placement sales of its common
          stock, or (v) unable to satisfy the covenants of the gold consignment
          agreement, then the Company may be unable to continue as a going
          concern. There can be no assurance that additional financing will be
          available when needed or, if available, that it will be on terms
          favorable to the Company and its stockholders. If the Company is not
          successful in generating sufficient cash flows from operations, or in
          raising additional capital when required in sufficient amounts and on
          terms acceptable to the Company, these failures would have a material
          adverse effect on the Company's business, results of operations and
          financial condition. If additional funds are raised through the
          issuance of equity securities, the percentage ownership of the
          Company's current shareholders would be diluted. These consolidated
          financial statements do not include any adjustments that may result
          from the outcome of these uncertainties.


                                       47
<PAGE>


ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

On June 10, 2003, the Company dismissed its former principal accountant, Stephen
P. Higgins, CPA of Huntington, New York, and engaged Guest & Company, P.C.,
Certified Public Accountants, of Tulsa, Oklahoma, as its principal accountants.
The decision to change accountants was approved by the Board of Directors of the
Company.

During the fiscal year ended July 31, 2002 and the subsequent interim periods
through January 31, 2003, there were no disagreements with the former accountant
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of the former accountant would have caused him to make
reference in connection with his report to the subject matter of the
disagreement, and Stephen P. Higgins, CPA has not advised the Company of any
reportable events as defined in paragraph (A) through (D) of Regulation S-K Item
304(a)(1)(v).

The accountant's report of Stephen P. Higgins, CPA as of and for the year ended
July 31, 2002, did not contain any adverse opinion or disclaimer of opinion.

ITEM 8A. CONTROLS AND PROCDEURES

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in the reports that
are filed or submitted under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports that are filed under the Exchange Act is
accumulated and communicated to management, including the principal executive
officer, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision of and with the participation of management, including the
principal executive officer, the Company has evaluated the effectiveness of the
design and operation of its disclosure controls and procedures as of July 31,
2004, and, based on its evaluation, our principal executive officer has
concluded that these controls and procedures are effective.

(b)  Changes in Internal Controls

There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation described above, including any corrective actions with regard to
significant deficiencies and material weaknesses.

ITEM 8B. OTHER INFORMATION

None.

                                       48
<PAGE>

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The following table sets forth the names, ages and current positions with the
Company held by the Directors, Executive Officers and Significant Employees;
together with the year such positions were assumed. There is no immediate family
relationship between or among any of the Directors, Executive Officers or
Significant Employees, and the Company is not aware of any arrangement or
understanding between any Director or Executive Officer and any other person
pursuant to which he was elected to his current position.

                                                                      DATE FIRST
                                        POSITION OR OFFICE            ELECTED/
NAME                       AGE          WITH THE COMPANY              APPOINTED
----                       ---          ----------------              ---------

Dr. Terry Washburn         51           Acting CEO, Director          2000
James G. Gordon            38           Director                      1999
Mitch Horowitz             43           Director                      2001
Harry M. Schmidt           59           President, HMS Jewelry        2000
Richard T. Clark           57           Director                      2003

DR. TERRY WASHBURN became President and Acting CEO of SGD on November 25, 2002;
became a Director during fiscal 2000; and is the Chief Executive Officer and a
Director of Premier Concepts, Inc. Dr. Washburn served eight years as a Board
member of a private pension fund during which he served on the investment
advisory subcommittee that successfully directed the firm's asset base, which
reached 3 billion dollars. Dr. Washburn earned a Bachelor of Business
Administration from the University of Oklahoma, a Master of Divinity from the
Southwestern Baptist Theological Seminary in Ft. Worth, Texas and a Doctor of
Ministry from the Fuller Theological Seminary in Pasadena, California. He has
extensive background in accounting, marketing, strategic planning and leadership
development. Dr. Washburn is also a Director of Team Sports Entertainment, Inc.

JAMES G. GORDON has been a Director of SGD since 1999 and was President of SGD
until November 25, 2002. Prior to starting the Company, Mr. Gordon was founder
and President of Silver. Mr. Gordon received a Bachelor of Science Degree from
the University of Arkansas in 1990 and has been involved in the jewelry
wholesale business since 1990. Mr. Gordon has also been a Certified Gemologist
since 1990.

MITCH HOROWITZ became a Director of the Company in April 2001. Mr. Horowitz is
the Associate Publisher of the "National Jeweler" magazine, by whom he has been
employed since 1993, and is currently responsible for all sales activities for
the magazine. For the ten years prior to 1993, Mr. Horowitz was employed by
Vance Publishing Corp. Mr. Horowitz has over 20 years of sales and marketing
experience in the jewelry industry. Mr. Horowitz earned his Bachelor's Degree at
the University of Buffalo.

                                       49
<PAGE>

HARRY M. SCHMIDT is President of HMS since its acquisition by SGD in October
2000. From 1983 through October 2000, Mr. Schmidt was the principal owner and
chief operating officer for HMS Jewelry Co., Ltd and HMS Operating Company, the
predecessors to HMS. From 1978 to 1983, Mr. Schmidt was Vice President of The
Leverett Company, a jewelry wholesaler.

RICHARD T. CLARK became a Director In May 2003. Mr. Clark is President of Clark
Capital Corp. in Tulsa, Oklahoma. Clark Capital Corp. deals in public company
corporate restructurings, including bankruptcies and tax arbitrage. Mr. Clark
worked as an independent broker at S.C. Costa Co. from 1989-1992 dealing in
corporate finance. Previous to that, he was Vice President at Dean Witter
Reynolds and before that, served as Vice President of Rotan Mosle, Inc. (later
acquired by Paine Webber). Mr. Clark received his BA from the University of
Tulsa in 1970 and an MBA with a major in finance from there in 1979.


AUDIT COMMITTEE

The Board of Directors has determined that Richard T. Clark meets the
requirements of a financial expert and serves as Chairman of the Audit
Committee. Mr. Clark is independent as specified in Item 7(d)(3)(iv) of Schedule
14A under the Exchange Act.

The small business issuer has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act, which is
made up of Mr. Clark and Mr. Horowitz.


COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Mr. Washburn, Mr. Clark and Mr. Horowitz filed their Form 5's on November 1,
2004. Mr. Washburn timely filed his Form 4 during the year to report the
acquisition of stock. Based upon information available to the Company, Mr.
Gordon has not made any required Section 16(a) filing.


                                       50
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

The following table shows the cash compensation of the Company's chief executive
officer and each officer whose total cash compensation exceeded $100,000, for
the three fiscal years ended July 31, 2004. The Company has no long-term
compensation plans.

<TABLE>

                                          SUMMARY COMPENSATION TABLE

NAME AND                   FISCAL                                                     OTHER                  ALL
PRINCIPAL                  YEAR                                                      ANNUAL                OTHER
POSITION                   ENDED               SALARY       BONUS              COMPENSATION         COMPENSATION
--------                   -----               ------       -----              ------------         ------------
<S>                        <C>               <C>               <C>                 <C>                        <C>
Terry Washburn             07/31/04           $60,000          -                   $24,000                    -
(Acting CEO                07/31/03                 -          -                   $24,000                    -
since 11/25/02)            07/31/02                 -          -                   $24,000                    -

James G. Gordon            07/31/04                 -          -                         -                    -
(President until           07/31/03           $42,500          -                         -                    -
11/25/02)                  07/31/02          $102,000          -                         -                    -
</TABLE>

The Company has made available certain non-monetary benefits to its executive
officers with a view to acquiring and retaining qualified personnel and
facilitating job performance. The Company considers such benefits to be ordinary
and incidental business costs and expenses. The value of such benefits did not
exceed, in the case of any named individual, 10% of the cash compensation of the
individual.

Mr. Washburn's other compensation is for consulting services performed for HMS.

On September 1, 1999, the Company established a stock option plan, which
reserved 10,000,000 shares of the Company's common stock for issue to certain
employees, directors and consultants. The Plan provides that options may be
granted for no less than fair market value at the date of the option grant. On
June 1, 2001, Directors Terry Washburn, James G. Gordon and Mitch Horowitz each
were granted an option to acquire 100,000 shares of the Company's common stock
at $1.00 per share, which expired on June 1, 2004. There are no options
outstanding at July 31, 2004.

The outside directors received $500 each for their service as a director during
fiscal 2002 and have received no compensation for their service as a director
during fiscal 2004 or 2003. There were no long-term incentive plan awards during
the fiscal year.

There were no option/SAR grants during fiscal 2004 and there were no option/SAR
exercises during fiscal 2004.

                                       51
<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

The following table indicates all persons who, as of October 26, 2004, the most
recent practicable date, are known by the Company to own beneficially more than
5% of any class of the Company's voting securities and all Directors of the
Company and all Officers who are not Directors of the Company, as a group. As of
October 26, 2004, there were 45,666,824 shares of the Company's common stock
outstanding.

<TABLE>

TITLE                      NAME AND ADDRESS                    AMOUNT AND NATURE
OF                           OF BENEFICIAL                       OF BENEFICIAL                   % OF
CLASS                            OWNER                               OWNER                      CLASS
-----                            -----                               -----                      -----
<S>                                                                  <C>                         <C>
Common              James G. Gordon                                  11,250,000                  24.6%
                    111 Rhodes
                    Conroe, TX  77301

Common              Lakewood Development                              4,500,000                   9.9%
                    5525 North Mac Arthur Blvd., #615
                    Irving, TX  75038

Common              BJB Services, Inc.                                3,500,000                   7.7%
                    7633 East 63rd Place, Suite 220
                    Tulsa, OK  74133

Common              Dr. Terry Washburn                                1,500,000                   3.3%
                    1701 West N.W. Highway
                    Grapevine, TX  76051

Common              Mitch Horowitz                                           -                    *
                    1199 S. Bell Line Rd, Ste 100
                    Coppell, TX  75019

Common              Richard T. Clark                                  1,000,000                   2.2%
                    1165 E 24th Place
                    Tulsa, OK  74114

Common              All directors and executive                      13,750,000                  30.1%
                    officers as a group (four persons)

* Less than 1%.

</TABLE>

                                       52
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANACTIONS

HMS leases its facility from HMS Leasing Company, LLC, at the rate of $8,075 per
month pursuant to a lease agreement that expires on October 31, 2010. This
amounted to $96,900 in rent expense during fiscal 2004 and fiscal 2003. HMS
Leasing Company, LLC is owned by the president of HMS. HMS is a guarantor of the
loan obligation of HMS Leasing Company, LLC on the facility, which has a balance
of $500,766 at July 31, 2004.

See Note 7 to the consolidated financial statements for details of the
$1,350,488 in note obligations to related parties.

At July 31, 2004, amounts due from related parties include the following:

                  Premier Concepts, Inc.                       $         13,124
                  President of HMS                                        7,587
                                                               ----------------

                  Total                                        $         20,711
                                                               ================

At July 31, 2004, the Company had made net advances of $7,587 to the president
of HMS, including companies owned by him. The president of HMS was issued
300,000 common shares and 1,100,000 common shares during fiscal 2004 and 2003,
respectively, in exchange for extending the $1,250,000 note obligation due him.

The Company has made net sales to Premier of $21,637 and $95,997 during fiscal
2004 and fiscal 2003, respectively, and has net receivables from Premier at July
31, 2004, of $13,124. The Company owns 7.9% of the stock of Premier at July 31,
2004, and the Chief Executive Officer of Premier is a Director and acting CEO of
the Company. On October 10, 2003, Premier filed a Voluntary Petition for
Reorganization under Chapter 11 of Title 11 of the United States Code in the
United States Bankruptcy Court for the Central District of California, Los
Angeles Division; Case No. LA 03-36445 BR. The Company reduced its receivable
from Premier to the amount they estimate is collectible and recorded a
write-down of $22,345 on July 31, 2004, which was in addition to the $70,000
write-down recorded in fiscal 2003.

At July 31, 2004, amounts due to related parties include the following:

                  G. David Gordon                                  $     132,430
                  Terry Washburn                                          27,132
                  BJB Services, Inc.                                      55,238
                  President of Gem Pak                                     5,426
                                                                   -------------

                       Total                                       $     220,226
                                                                   =============

                                       53
<PAGE>

At July 31, 2004, the Company owed G. David Gordon, CEO of HMS, a shareholder
and the brother of a Director, $132,430 in addition to a $100,488 note
obligation. The $132,430 includes accrued compensation in the amount of $75,000
which is payable in SGD common stock. During fiscal 2003, G. David Gordon was
issued 2,000,000 common shares for issuing his personal guarantee on the
Company's obligation to the gold lender and the Company's $835,000 note
obligation. G. David Gordon also received 1,000,000 shares pursuant to a
settlement agreement with the Company.

A company owned by G. David Gordon and the President of Tandori acquired the
assets and assumed substantially all liabilities of Tandori effective July 31,
2003. The Company realized a gain of $233,169 on the transaction in fiscal 2003,
which is included in discontinued operations.

Terry Washburn, President of SGD and a stockholder, was owed $27,132 at July 31,
2004, which is primarily for accrued compensation. Mr. Washburn was issued
1,500,000 shares of SGD common stock during fiscal 2004, in exchange for $15,000
which was due him.

BJB Services, Inc., a shareholder, and another company controlled by the
principal of BJB were owed $55,238 at July 31, 2004, for financial services
rendered. BJB was issued 3,500,000 shares of SGD common stock during fiscal
2004, in exchange for $35,000 which SGD owed BJB.

The President and 20% owner of Gem Pak was owed $5,426 at July 31, 2004.


ITEM 13.  EXHIBITS

          See Exhibit Index at Page 56.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES - The aggregate fees billed as of October 31, 2004 for professional
services rendered by the Company's current accountant was $38,550 and $43,100
for the audit of the Company's annual financial statements for the fiscal years
ended July 31, 2004 and 2003, respectively, and for the reviews of the financial
statements included in the Company's Forms 10-QSB for those fiscal years. The
Company's prior accountant billed $33,500 during fiscal 2003 for the prior year
audit and review of the applicable Forms 10-QSB for fiscal 2003.

AUDIT-RELATED FEES - None.

TAX FEES - None.

ALL OTHER FEES - Other than the services described above, no other fees were
billed for services rendered by the principal accountant during fiscal 2004 or
2003.

AUDIT COMMITTEE POLICIES AND PROCEDURES - Not applicable.

                                       54
<PAGE>

If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees -
Not applicable.


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                              SGD HOLDINGS, LTD.



Date:  November 19, 2004                      By:  /s/ Terry Washburn
                                                   -----------------------------
                                                   Terry Washburn
                                                   President, Acting CEO and
                                                   Principal Accounting Officer

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.


Date:  November 19, 2004                      By:  /s/ Terry Washburn
                                                   -----------------------------
                                                    Terry Washburn
                                                    Director

Date:  November 19, 2004                      By:  /s/ Mitch Horowitz
                                                   -----------------------------
                                                    Mitch Horowitz
                                                    Director

Date:  November 19, 2004                      By:  /s/ Richard T. Clark
                                                   -----------------------------
                                                    Richard T. Clark
                                                    Director

Date:  November 19, 2004                      By:  /s/
                                                   -----------------------------
                                                    James G. Gordon
                                                    Director


                                       55
<PAGE>

EXHIBITS HAVE BEEN OMITTED FROM THIS COPY. COPIES OF EXHIBITS MAY BE OBTAINED
FROM SGD HOLDINGS, LTD. (THE "COMPANY") UPON REQUEST AND PAYMENT OF THE
COMPANY'S COSTS IN FURNISHING SUCH COPIES. COPIES MAY ALSO BE OBTAINED FROM THE
SECURITIES AND EXCHANGE COMMISSION FOR A SLIGHT CHARGE. (The foregoing is not
applicable to the original(s) hereof.)

<TABLE>
                                                 EXHIBIT INDEX
Securities and
Exchange
Commission                                                                                              Page
Exhibit No.           Type of Exhibit                                                                  Number
-----------           ---------------                                                                  ------
<S>                   <C>                                                                                <C>
2                     Plan of acquisition, reorganization, arrangement,                                  N/A
                      liquidation, or succession

3(i)                  Articles of incorporation                                                          N/A

3(ii)                 By-laws                                                                            N/A

4                     Instruments defining the rights of holders, incl. Indentures                       N/A

9                     Voting trust agreement                                                             N/A

10                    Material contracts                                                                 N/A

11                    Statement re: computation of per share earnings                                  Item 7

16                    Letter on change in certifying accountant                                          N/A

18                    Letter on change in accounting principles                                          N/A

21                    Subsidiaries of the Registrant                                                   Item 1

22                    Published report regarding matters submitted to vote                               N/A

23                    Consent of experts and counsel                                                     N/A

24                    Power of Attorney                                                                  N/A

31                    Certification pursuant to 18 U.S.C. Section 1350
                      Section 302 of the Sarbanes-Oxley Act of 2002                                      57

32                    Certification pursuant to 18 U.S.C. Section 1350
                      Section 906 of the Sarbanes-Oxley Act of 2002                                      58
</TABLE>

                                       56