UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(mark one)

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

For the quarterly period ended December 31, 2006

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

For the transition period from           To

SED International Holdings, Inc.

GEORGIA		22-2715444
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)
4916 NORTH ROYAL ATLANTA DRIVE, TUCKER, GEORGIA		30084
(Address of principal executive offices)		(Zip Code)

(770) 491-8962
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(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. Yesþ     Noo

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filero		Accelerated Filero		Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yeso      No þ

The number of shares outstanding of the Registrant’s common stock, par value $.01 per share, at February 1, 2007 was 3,878,856 shares.

 

 

INTRODUCTORY NOTE

          This Amendment No. 1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, as filed by the Company on February 14, 2007, is being filed to amend Part I, Item 4 of the report.

SED International Holdings, Inc. and Subsidiaries

INDEX

						Page
PART I — FINANCIAL INFORMATION:
		Item 1.		Financial Statements
				Condensed Consolidated Balance Sheets as of December 31, 2006 (Unaudited) and June 30, 2006			3
				Condensed Consolidated Statements of Operations for the three months and six months ended December 31, 2006 and 2005 (Unaudited)			4
				Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2006 and 2005 (Unaudited)			5
				Notes to Condensed Consolidated Financial Statements (Unaudited)			6
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
		Item 3.		Quantitative and Qualitative Disclosures about Market Risk			18
		Item 4.		Controls and Procedures			19
PART II — OTHER INFORMATION:
		Item 1.		Legal Proceedings			19
		Item 1A.		Risk Factors			20
		Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			20
		Item 3.		Defaults Upon Senior Securities			20
		Item 4.		Submission of Matters to a Vote of Security Holders			21
		Item 5.		Other Information			21
		Item 6.		Exhibits			21
SIGNATURES							22
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE PFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE PFO

FORWARD LOOKING STATEMENT INFORMATION

Certain statements made in this Quarterly Report on Form 10-Q/A are “forward-looking statements regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. The terms “we”, “our”, “us”, or any derivative thereof, as used herein refer to SED International Holdings, Inc. and Subsidiaries.

approximately $6.1 million in US dollar denominated liabilities. In the aggregate, if the value of the dollar against the foreign denominated currency strengthens by 10%, SED would record a transaction loss of approximately $610,000. Conversely, if the value of the dollar declines by 10%, SED would record a transaction gain of approximately $610,000. SED was not a party to any hedge transactions as of December 31, 2006. The information included in SED’s financial statements, and other documentation, does not include the potential impact that might arise from any decline in foreign currency in Latin American after December 31, 2006 or those declines which may occur in the future and, accordingly, should be analyzed considering that circumstance.

ITEM 4. CONTROLS AND PROCEDURES

     Our management, with the participation of our principal executive and financial officers, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our principal executive and financial officers have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

     There have been changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting due to our reentry as a reporting company under the Exchange Act. Subsequent to our fiscal year ended June 30, 2006 and during the period covered by this report we increased our focus on controls over financial reporting to strengthen our disclosure controls and procedures in order to ensure that they are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

     To strengthen our internal controls over financial reporting during the period covered by this report we have taken the following actions:

	1.		the hiring of a consultant to assist in the preparation of our Exchange Act periodic reports and to help identify and address any known weaknesses in our internal controls and procedures over financial reporting;
	2.		the engagement of two top tier, experienced and reputable certified public accounting firms in Atlanta, Georgia, one with over 100 employees and PCAOB experience, to assist us, on an as needed basis, in addressing any new accounting pronouncements and other recent accounting changes that may affect our internal controls and procedures over financial reporting, to review our Exchange Act periodic reports prior to filing, and to help identify and address any weaknesses in our internal controls and procedures over financial reporting; and
	3.		mandating that our internal accounting staff stay current on accounting pronouncements and accounting changes that may affect our internal controls and procedures over financial reporting by participation in relevant continuing professional education programs, and subscriptions to various accounting journals including, CFO Magazine, Journal of Accountancy, The CPA Letter and AICPA News Update.

     To date, these are the only changes that we have implemented to strengthen our internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

     On June 19, 2006 we instituted an action in the Superior Court of Fulton County, State of Georgia captioned SED International, Inc. vs. Michael Levine, Civil Action file no. 2006-CV-118591. In the action, we assert that Mr. Levine breached the terms of our Termination Agreement and request that the court grant injunctive relief. In response, Mr. Levine has denied our assertions, filed a third party complaint against SED International Holdings and asserted counterclaims against SED International alleging breach and infliction of emotional distress. In connection with the third party complaint and the counterclaims, Mr. Levine has asked that the court award him costs, fees and punitive damages. In October 2006, we filed an Answer to his third party complaint and discovery has commenced. We believe that we have meritorious defenses to his complaint and counterclaims and will vigorously defend and prosecute this matter.

     As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, on November 3, 2005, Mark Diamond (“Mr. Diamond”) filed a suit in the Superior Court of Dekalb County, State of Georgia captioned Mark Diamond vs. SED International Holdings, Inc., et al., Civil Action file no. 06-CV-12452-7. In this lawsuit, he alleges that we breached his employment agreement and has made multiple other claims, and has asked the court for declaratory judgment on some of the claims and an award of monetary damages under the theory of quantum meruit. With respect to the claims for declaratory judgment, we moved for summary judgment and the court has ruled in our favor. Subsequently, an appeal by Mr. Diamond of that summary judgment decision was withdrawn. Upon withdrawal, the trial court scheduled a hearing on our motion to disqualify the attorney representing Mr. Diamond due to a conflict of interest. We are currently waiting for that hearing to be rescheduled. From 1999 to 2005 Mr. Diamond was president, chief operating officer and a director. During that period, from 2003 to 2005 he was also chief executive officer; from 2004 to 2005 he was president, chief executive and chief operating officer of SED International. We believe that we have meritorious defenses to his complaint and counterclaims and will vigorously defend this matter.

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.