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EX-31.1 - CERTIFICATION - Grand China Energy Group Ltdexhibit31-1.htm
EX-32.1 - CERTIFICATION - Grand China Energy Group Ltdexhibit32-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2010

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

For the transition period from _________to _______

Commission File No.000-53490

SGB INTERNATIONAL HOLDINGS INC.
(Exact name of registrant as specified in its charter)

British Columbia N/A
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

909 – 6081 No. 3 Road, Richmond, BC Canada V6Y 2B2
(Address of principal executive offices) (zip code)

(604) 484-3127
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]   Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [x]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ x ] No [ ]

1


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ N/A ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 23,720,446 shares of common stock as of February 18, 2011

2


TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION 4
ITEM 1. FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 9
ITEM 4T. CONTROLS AND PROCEDURES 9
PART II - OTHER INFORMATION 10
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 1A. RISK FACTORS 10
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 13
ITEM 4. (REMOVED AND RESERVED) 13
ITEM 5. OTHER INFORMATION. 13
ITEM 6. EXHIBITS 14
SIGNATURES 15

3


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

These financial statements have been prepared by SGB International Holdings Inc. without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with such SEC rules and regulations. In the opinion of management, the accompanying statements contain all adjustments necessary to present fairly the financial position of our company as of December 31, 2010, and the results of operations, stockholders’ equity, and cash flows for the three and nine month period ended December 31, 2010 and for the period from inception (November 6, 1997) to December 31, 2010. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto filed as a part of our company’s annual report on Form 10-K filed on July 14, 2010.

4


 

SGB INTERNATIONAL HOLDINGS INC.
(A Development Stage Company)

December 31, 2010

  Index
   
Balance Sheets F-1
Statements of Operations F-2
Statements of Cash Flows F-3
Notes to the Financial Statements F-4

5



SGB INTERNATIONAL HOLDINGS INC.
(A Development Stage Company)
Balance Sheets
(Expressed in US dollars)

        As of  
        December 31,     March 31,  
        2010     2010  
        (unaudited)     (audited)  
ASSETS                
Current Assets                
Cash     $ 6,561   $  43,494  
Prepaid Expens       5,027     -  
GST receivable       4,658     266  
Total Current Assets       16,246     43,760  
                 
Total Assets     $  16,246   $  43,760  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
Current Liabilities                
Accrued liabilities   (Note 3 )   1,487     5,951  
Due to related parties   (Note 4 )   277,102     171,542  
Notes payable       -     -  
Total Liabilities       278,589     177,493  
Commitments and Contingencies                
Stockholders’ Equity (Deficit)                
Common Stock, Unlimited shares authorized, without par value
22,820,445 shares issued and outstanding
 
 
198,857
   
198,857
 
Donated Capital   (Note 4-f & 4-g )   71,435     71,435  
Accumulated Other Comprehensive Loss       (2,847 )   3,908  
Deficit Accumulated During the Development Stage       (529,788 )   (407,933 )
Total Stockholders’ Equity (Deficit)       (262,343 )   (133,733 )
Total Liabilities and Stockholders’ Equity (Deficit)     $  16,246   $  43,760  

See Notes to Financial Statements

F-1



SGB INTERNATIONAL HOLDINGS INC.
(A Development Stage Company)
Statements of Operations
(Expressed in US dollars)
(unaudited)

                            Accumulated from  
    For the     For the     For the     For the     Nov 6,1997  
    Three Months     Three Months     Nine Months     Nine Months     (Date of Inception)  
    Ended     Ended     Ended     Ended     to  
    December 31,     December 31,     December 31,     December 31,     December 31,  
    2010     2009     2010     2009     2010  
Revenue   -     -     -     -     -  
                               
Expenses                              
                               
Amortization   -     -     -     131     1,994  
Automobile   -     -     -     238     907  
General and administrative   3,841     834     8,664     7,058     51,919  
Interest   24     -     24     74     2,273  
Director fee   3,254     -     9,920     20,158     32,148  
Management fees   23,688     22,704     70,116     66,305     196,808  
Professional fees   13,882     6,325     26,496     15,675     169,535  
Rent   2,242     2,149     6,636     6,275     30,688  
Travel   -     -     -     1,958     4,501  
                               
Total Expenses   46,930     32,011     121,855     117,872     490,772  
                               
Net Loss from Continuing Operations   (46,930 )   (32,011 )   (121,855 )   (117,872 )   (490,772 )
                               
Other Income                              
                               
Gain on Disposal of Temporary Investments   -     -     -     -     946  
    Forgiveness of debt         -     -     -     7,095  
                               
Net Loss before Discontinued Operations   (46,930 )   (32,011 )   (121,855 )   (117,872 )   (482,731 )
                               
Discontinued Operations   -     -     -     -     (47,057 )
                               
                               
Net Loss   (46,930 )   (32,011 )   (121,855 )   (117,872 )   (529,788 )
                               
Other Comprehensive Income (Loss)                              
                               
Foreign currency translation adjustment   (8,045 )   (670 )   (6,755 )   (52,448 )   (2,847 )
                               
Comprehensive Loss   (54,975 )   (32,682 )   (128,610 )   (170,320 )   (532,635 )
                               
                               
Net Loss Per Share – Basic and Diluted   (0.00 )   (0.00 )   (0.01 )   (0.01 )   N/A  
                               
                               
Weighted Average Shares Outstanding   22,820,445     22,820,445     22,820,445     28,220,000     N/A  

See Notes to Financial Statements

F-2



SGB INTERNATIONAL HOLDINGS INC.
(A Development Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
(unaudited)

                Accumulated  
    For the     For the     From  
    Nine Months     Nine Months     Nov 6, 1997  
    Ended     Ended     (Date of Inception)  
    December, 2010     December, 2009     December 31, 2010  
                   
Cash flows from operating activities                  
Net loss $  (121,855 ) $  (117,872 ) $  (529,788 )
     Adjustment to reconcile net loss to net cash used in operating activities:            
Amortization   -     138     1,994  
Donated services   -     -     66,439  
Forgiven debt   -     -     (7,096 )
Gain on sale of temporary investment   -     -     (946 )
                -  
Changes in operating assets and liabilities:               -  
   Prepaid expenses   -     -     (1,329 )
   Accounts receivable   (9,413 )   1,384     (9,181 )
   Accounts payable and accrued liabilities   (4,592 )   1,798     1,225  
   Due to related party   -     -     32,631  
                   
Net Cash (Used for) by Operating Activities   (135,860 )   (114,552 )   (446,051 )
                   
Cash flows from investing activities                  
                   
   Purchase of temporary investment   -     -     (1,785 )
   Proceeds from sale of temporary investment   -     -     2,795  
   Purchase of property and equipment   -     -     (1,957 )
                   
Net Cash (Used for) Provided by Investing Activities   -     -     (947 )
                   
Cash flows from financing activities                  
                   
   Proceeds from notes payable   -     -     12,867  
   Advances from related parties   101,900     117,762     319,351  
   Proceeds from common stock subscribed   -     -     122,507  
                   
Net Cash (Used for) Provided by Financing Activities   101,900     117,762     454,725  
                   
Effect of exchange rate changes on cash   (2,973 )   8,047     (1,166 )
                   
Increase (Decrease) In Cash   (36,933 )   11,257     6,561  
                   
Cash – Beginning of Period   43,494     56,730     -  
                   
Cash – End of Period $  6,561   $  67,987   $  6,561  
                   
Supplemental Disclosures                  
Interest paid $  24   $  74   $  2,273  
Income taxes paid $  -   $  -   $  -  

See Notes to Financial Statements

F-3



SGB INTERNATIONAL HOLDINGS INC.
(A Development Stage Company)
Notes to the Financial Statements
(Expressed in US dollars unless otherwise stated)
December 31, 2010

1.

Development Stage Company

     

Orca International Language Schools Inc. (the “Company”) was incorporated in British Columbia, Canada on November 6, 1997. It changed its name to SGB International Holdings Company on March 3, 2009. The Company is a Development Stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage Enterprises”. During the third quarter of 2008, the Company changed its principal business from the language education business to energy investment.

     

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at December 31, 2010, the Company has working capital deficit of $262,343 and accumulated losses of $532,635 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

     
2.

Summary of Significant Accounting Policies

     
a)

Basis of Presentation

     

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is March 31.

     
b)

Use of Estimates

     

The preparation of financial statements in conformity with United States generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, donated expenses, and deferred income tax valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

     
c)

Basic and Diluted Net Income (Loss) Per Share

     

The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As at December 31, 2010, there are no dilutive potential common shares.

     
d)

Comprehensive Loss

     

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2010, the Company’s component of comprehensive loss consisted of loss from operations and foreign currency translation adjustments.


F-4


 

  e)

Cash and Cash Equivalents

     
 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

     
  f)

Property and Equipment

     
 

Property and equipment consists of computer hardware, is recorded at cost, and is depreciated on a straight line basis over an estimated useful life of three years.

     
  g)

Website Development Costs

     
 

The Company recognizes the costs associated with developing a website in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. The Company also follows the guidance pursuant to the Emerging Issues Task Force (EITF) No. 00-2, “Accounting for Website Development Costs” for website development costs incurred. The Company capitalizes website development costs that meet the capitalization criteria contained in SOP No. 98-1 unless recoverability of costs is not assured. To date the Company has charged all website development costs to operations.

     
  h)

Long-Lived Assets

     
 

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

     
 

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

     
  i)

Financial Instruments and Fair Value Measures

     
 

SFAS No. 157 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our financial instruments consist principally of cash, accounts receivable, accrued liabilities, accounts payable, and amounts due to a related party. Pursuant to SFAS No. 157, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The Company’s operations are in Canada and the United States, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

F-5


 

  j)

Income Taxes

     
 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

     
  k)

Foreign Currency Translation

     
 

The Company’s functional currency is the Canadian dollar. The financial statements are translated to United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation” using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity (deficit). Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in United States dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

     
  l)

Stock-based Compensation

     
 

The Company records stock-based compensation in accordance with SFAS No. 123R “Share Based Payments”, using the fair value method. The Company has not issued any stock options and has had no unvested share based payments since inception.

     
  m)

Recent Accounting Pronouncements – Impact of New Accounting Standards

     
 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.


3.

Accrued Liabilities

     

Accrued liabilities as at December 31, 2010, consist of $ 1,487 bill payable.

     
4.

Related Party Transactions

     
a)

On December 31, 2010, Xin Lenny Li agreed to convert the accrued director fee of $3,254 for the period from October 1 to December 31, 2010 owed by the Company to shareholder’s loan.

     
b)

On January 1, 2010 the Company entered into a new service agreement with Xin Lenny LI, the director of the Company. Pursuant to this agreement, the Company agreed to accrue CDN $1,000 monthly as director fee. On March 31, 2010, Mr. Li agreed to convert the accrued director fee of $ 2,952 for the period from January 1 to March 31, 2010 and the accrued director fee of $ 12,403 for the period from July 1 to September 30, 2009 owed by the Company to shareholder’s loan.

     
c)

On December 31, 2009, Xin Lenny LI, the director of the Company agreed to convert the accrued director fee of $ 8,269 owed by the Company for the period of May to June 2009 to shareholder’s loan. And, Xin Lenny LI voluntarily to waive the director fee of this quarterly from October to December 2009.

     
d)

From April 1, 2009 to December 31, 2010, the company incurred quarterly management fee CDN $ 24,000 to the significant shareholder, SGB C&C Investment Ltd.

     
e)

To the date December 31, 2010, the significant shareholder, SGB C&C Investment Ltd. loaned the Company $277,102 (CDN$275,614) for expenses and management fee to be incurred by the Company. The amount is non-interest bearing, unsecured, and due on demand.

     
f)

Until December 31, 2008, the former President of the Company provided donated office premises to the Company valued at $ 229 per month. During the year ended March 31, 2009, donated rent of $1,463 was charged to operations. During the year ended March 31, 2009, the Company also recognized $2,926 for donated management services at CDN$500 per month provided by the former President of the Company.

     
g)

As at March 31, 2009, amounts owing to the former President of the Company of $45,962 (CDN$47,131) were donated to the Company and recorded as donated capital. At December 31, 2010 the Company owed $nil to the President of the Company.

     
5.

Common Stock

     

Company is authorized to issue no-par unlimited shares and has 22,820,445 shares issued and outstanding as of December 31 , 2010 and March 31, 2010, respectively.


F-6


 

  a)

On March 4, 2009, the Company approved a 4.5 for one forward stock split of the issued and outstanding common stock. As a result, the issued and outstanding capital has increased from 5,071,210 shares of common stock with no par value to 22,820,445 shares of common stock with no par value.

     
  b)

On March 3, 2009, the Company created a new class of preferred stock. As a result, the authorized capital consists of an unlimited amount of common stock without par value and an unlimited amount of preferred stock without par value. The Company has not issued any preferred stock.

     
  c)

On November 12, 2008, the Company entered into a subscription agreement with the significant shareholder, SGB C &C Investment Ltd. for the sale of 6,750,000 split-adjusted common shares for gross proceeds of $121,245 (CDN$150,000). Subsequent to the sale, SGB C &C Investment Ltd. owns 18,607,500 split-adjusted common shares which represent 81.54% of the issued and outstanding shares of the Company

     
  d)

On November 12, 2008, the former President of the Company voluntarily returned 6,750,000 split-adjusted common shares to the Company for cancellation

     
  e)

On July 24, 2008, pursuant to a share acquisition agreement, the former President of the Company transferred 11,857,500 split adjusted common to the significant shareholder, SGB C &C Investment Ltd. in consideration for $308,750. The transferred shares represent 51.96% of the issued and outstanding common share capital resulting in a change of control of the Company.

     
  f)

On April 8, 2008, three shareholders returned for cancellation an aggregate of 5,400,000 split adjusted shares of common stock to treasury for no consideration.


6.

Commitments and Contingencies

   

On January 1, 2010 the Company entered into a service agreement with Xin Lenny LI, the director of the Company. Pursuant to this agreement, the Company agreed to accrue CDN $ 1000 monthly as director fee.

   

On January 15, 2009 the Company entered into a service agreement with SGB C&C Investment Ltd. a related party. Pursuant to this agreement, the Company agreed to pay CDN $ 24,000 quarterly.


F-7


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

Forward-Looking Statements

This report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “intends” “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in section 1A entitled “Risk Factors” on page 10, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this report, the terms “we”, “us”, “our company”, and “SGB” mean SGB International Holdings Inc. and the term “Orca” means Orca International Language Schools Inc., unless otherwise indicated.

Corporate Overview

We were incorporated in the province of British Columbia, Canada under the name “Slocan Valley Minerals Ltd.” on November 6, 1997 with an authorized share capital of 10,000,000 common shares without par value. Following our incorporation we were not actively engaged in any business activities. On June 1, 2004 we increased our authorized share capital from 10,000,000 common shares without par value to an unlimited number of common shares without par value. On June 11, 2004 we changed our name to “Orca International Language Schools Inc.”

Effective March 3, 2009, we changed our name from “Orca International Language Schools Inc.” to “SGB International Holdings Inc. and we created a new class of preferred stock. As a result, our authorized capital consists of an unlimited amount of common stock without par value and an unlimited amount of preferred stock without par value. We have not issued any preferred stock.

Our Business

Our goal originally was to provide management services to schools in the international education industry based on the principles of: improving their administrative, operational, marketing, sales and human resources functions; building links with other schools worldwide to foster student exchange; and repositioning the schools to concentrate their curriculum on preparing students for one of the three major English proficiency tests. We have been searching for a school as the initial client but we have not been successful in finding any such school. Since we have incurred losses since November 6, 1997, our board of directors has decided to explore the possibility of adopting a different business plan to protect our shareholders value.

We are defined as a "shell company" under the Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act because we have nominal operations and nominal assets.

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Results of Operations

The following summary of our results of operations should be read in conjunction with our unaudited consolidated financial statements for the three month period ended December 31, 2010 which are included herein.

Revenues

We have not earned any revenues since our inception. We are still in the development stage and do not anticipate earning any revenues until such time as we can establish an alliance with targeted companies to market or distribute the results of our research projects.

The following summary of our results of operations should be read in conjunction with our audited financial statements included in our Form 10-K filed on July 14, 2010.

Expenses

Our expenses for the three and nine months ended December 31, 2010 and 2009 were as follows:

    For the     For the     For the     For the  
    Three Months     Three Months     Nine months     Nine months  
    Ended     Ended     Ended     Ended  
    December 31,     December 31,     December 31,     December 31,  
    2010     2009     2010     2009  
Amortization $  -   $  -   $  -   $  131  
Automobile   -     -     -     238  
General and administrative   3,841     834     8,664     7,058  
Interest   24     -     24     74  
Director fee   3,254     -     9,920     20,158  
Management fees   23,688     22,704     70,116     66,305  
Professional fees   13,882     6,325     26,496     15,675  
Rent   2,242     2,149     6,636     6,275  
Travel   -     -     -     1,958  
                         
Total Expenses $  46,930   $  32,011   $  121,855   $  117,872  

In the three months ended December 31, 2010 our expenses increased by 46.6% because of increase in our professional fees.

In the nine months ended December 31, 2010 our expenses remained at a similar level relative to the nine month period ended December 31, 2009.

Cash Requirements

We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to the retention of consultant experts, travelling expenses, and development expenses as we explore opportunities to adopt a business plan other than the current business of providing management services to schools in the international education industry. We anticipate our ongoing operating expenses will also increase as a result of our ongoing reporting requirements under the Exchange Act.

We estimate our general administrative expenses and working capital requirements for the next 12-month period to be as follows:

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Automobile $  1,000  
Office Expenses   8,000  
Telephone and Communications   2,000  
Travel   5,000  
Accounting   20,000  
Legal   20,000  
Management Fees   90,000  
Directors Fees   24,000  
Total $  170,000  

There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our business.

Liquidity and Capital Resources

Working Capital

    December 31,     March 31,  
    2010     2010  
    (unaudited)     (audited)  
Total Current Assets $  16,246   $  43,760  
Total Liabilities   278,589     177,493  
Working Capital (Deficit) $  (262,343 ) $  (133,733 )

As of December 31, 2010 our working capital deficit increased by 96% because we have not generated any revenues and we continued to incur and accrue management service fees. We have incurred recurring losses from inception. Our ability to meet our financial obligations and commitments is primarily dependent upon continued financial support of our shareholders, directors and the continued issuance of equity to new and existing shareholders.

Management believes that our company’s cash will not be sufficient to meet our working capital requirements for the next three-month period. Should this prove to be the case, our company plans to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next three months primarily through the private placement of our equity securities. There is no assurance that our company will be able to obtain further funds required for our continued working capital requirements.

Cash Flows

We anticipate that we will incur approximately $1,000,000 for operating expenses, including, legal, accounting and audit expenses associated with our reporting requirements as a public company under the Exchange Act during the next twelve months.

    For the     For the  
    Nine months     Nine months  
    Ended     Ended  
    December 31, 2010     December 31, 2009  
             
Net Cash (Used for) by Operating Activities $  (135,860 ) $  (114,552 )
Net Cash (Used for) Provided by Investing Activities   --     --  
Net Cash (Used for) Provided by Financing Activities   101,900     117,762  
             
Increase (Decrease) In Cash $  (36,933 ) $  11,257  

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Going Concern

Our financial statements have been prepared on a going concern basis, which implies we will continue to realize our assets and discharge our liabilities in the normal course of business. We have not generated revenues since inception and have never paid any dividends and are unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, our ability to obtain equity financing to continue operations, and the attainment of profitable operations. As at December 31, 2010, we have working capital deficit of $262,343 and accumulated losses of $529,788 since inception. These factors raise substantial doubt regarding our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations that provide financing, liquidity, market risk or credit risk support to us

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4T. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. Our management continues to review processes and will make necessary changes to strengthen our system of internal controls over financial reporting.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2010 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report in evaluating our company and its business before purchasing shares of our company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.

Risks Associated with our Company

We have a limited operating history and if we are not successful in operating our business, then investors may lose all of their investment in our company.

We have a limited operating history. Our business is subject to the risks and expenses encountered by start up companies, such as uncertainties regarding our level of future revenues and our inability to budget expenses and manage growth accordingly and our inability to access sources of financing when required and at rates favorable to us. Our limited operating history and the highly competitive nature of the business in which we plan to operate will make it difficult or impossible to predict future results of our operations. If we are not successful in operating our business, then investors may lose all of their investment in our company.

We have a history of losses and have a deficit, which raises substantial doubt about our ability to continue as a going concern.

We have not generated any revenues since our date of inception and we will continue to incur operating expenses without revenues until we acquire school(s) as clients, commence our business and finally, achieve a profitable level of operations. Our net loss since inception to December 31, 2010 is $529,788. We had cash in the amount of $6,561 as of December 31, 2010. We currently do not have any operations and we have no income. We estimate our average monthly operating expenses to be approximately $15,000 each month. We cannot provide assurances that we will be able to successfully develop our business. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors’ report on our audited financial statements, dated June 22, 2010, filed with our annual report on Form 10-K on July 14, 2010. If we are unable to continue as a going concern, investors will likely lose all of their investments in our company.

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Our future is dependent upon our ability to obtain financing and if we do not obtain such financing, we may have to cease our exploration activities and investors could lose their entire investment.

There is no assurance that we will operate profitably or will generate positive cash flow in the future. We will require additional financing in order to proceed beyond the first few months of our plan of operations. We will require additional financing to sustain our business operations if we are not successful in earning revenues. We currently do not have any arrangements for further financing and we may not be able to obtain financing when required. Our future is dependent upon our ability to obtain financing. If we do not obtain such financing, our business could fail and investors could lose their entire investment.

Because we may never earn revenues from our operations, our business may fail.

We anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from our business, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our company.

Because our directors, executive officers, and principal shareholders control a large percentage of our common stock, such insiders have the ability to influence matters affecting our shareholders.

Our directors and executive officers, in the aggregate, beneficially own over 63.56% of the issued and outstanding shares of our common stock with a principal shareholder beneficially owns 63.56% of the issued and outstanding shares of our common stock. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our directors, executive officers and principal shareholders control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

Our directors and executive officers are engaged in other business activities and accordingly may not devote sufficient time to our business affairs, which may affect our ability to conduct operations and generate revenues.

Our directors and executive officers are involved in other business activities. Xin Li, our President, Chief Executive Officer, Chief Financial Officer and Director spends approximately 20 hours, or 50%, of his business time on the management of our company and our other director, Stuart Wooldridge, spends approximately 10 hours, or 20%, of his business time on the management of our company. As a result of their other business endeavors, they may not be able to devote sufficient time to our business affairs, which may negatively affect our ability to conduct our ongoing operations and our ability to generate revenues. In addition, the management of our company may be periodically interrupted or delayed as a result of their other business interests.

All of our assets and all of our directors and executive officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and executive officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.

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Risks Associated with Our Common Stock

Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.

Although our common stock is currently listed for quotation on the OTC Bulletin Board, none of our shares have yet been purchased or sold on that market. Even when a market is established and trading begins, trading through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends and currently do not intend to ever pay any cash dividends. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.

Our common stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations, which may limit a shareholder’s ability to buy and sell our stock.

Our stock is a penny stock. the Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

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FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker or dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, brokers or dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for brokers or dealers to recommend that their customers buy our common stock, which may prevent you from reselling your shares and may cause the price of the shares to decline.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On January 17, 2011, we granted our directors and one consultant stock options to purchase an aggregate of 2,282,044 shares of our common stock at an exercise price of Cdn $0.10 per share for a term expiring January 17, 2012. The options are fully vested upon grant.

We granted these stock options to three non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) relying on Section 4(2) of the Securities Act of 1933, as amended and/or Rule 506 promulgated pursuant to the Securities Act of 1933, as amended.

On February 2, 2011 Can-US Int’l Capital Group Inc. exercised their option to purchase 900,000 shares of common stock. On February 18, 2011, we issued 900,000 shares of common stock to Can-US Int’l Capital Group Inc.

We issued the shares to one non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) relying on Section 4(2) of the Securities Act of 1933, as amended and/or Rule 506 promulgated pursuant to the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

On November 30, 2010, we held our annual and special meeting of shareholders. At the meeting, our shareholders elected Xin Li and Stuart Wooldridge as directors of our company. Jun Huang has decided not to run for re-election as a director of our company at the meeting. To our knowledge, Mr. Huang’s decision was not as a result of any disagreement with our company on any matter relating to our operations, policies or practices.

At the meeting, our shareholders appointed Stan J.H. Lee, CPA as our auditor and authorized our directors to fix our auditor’s remuneration.

At the meeting, our shareholders approved the 2010 equity compensation plan pursuant to which our board of directors may grant stock options or stock awards to acquire up to a maximum of 10% of the total issued and outstanding common shares of our company at the time of grant.

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ITEM 6. EXHIBITS

Exhibits required by Item 601 of Regulation S-K:

Exhibit
Number

Description
3.1 Articles of Incorporation (attached as an exhibit to our registration statement on Form SB-2 filed on August 7, 2007)
3.01

Notice of Alteration filed with the Ministry of Finance, BC Registry Services effective March 3, 2009 (attached as an exhibit to our current report on Form 8-K filed on March 5, 2009)

3.02

Amended and Restated Articles of Incorporation of SGB International Holdings Inc. (attached as an exhibit to our current report on Form 8-K filed on March 5, 2009)

10.1

Share transfer agreement dated July 2, 2008 among Stuart Wooldridge, SGB C&C Investment Ltd. and our company (attached as an exhibit to our current report on Form 8-K filed on August 6, 2008).

10.2

Form of Private Placement Subscription Agreement between SGB C&C Investment Ltd. and our company (attached as an exhibit to our current report on Form 8-K filed on November 18, 2008)

10.3

Form of stock option agreement (attached as an exhibit to our current report on Form 8-K filed on January 21, 2011)

16.1

Letter from Manning Elliott LLP dated July 31, 2009 (attached as an exhibit to our current report on Form 8-K filed on August 8, 2009)

31.1*

Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SGB INTERNATIONAL HOLDINGS INC.

By:  
   
/s/ Xin Li  
Xin Li  
President, CEO, CFO and Director  
Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer  
Date: February 18, 2011  

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