Utah
|
333-29903
|
30-0123229
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Commission
File Number)
|
(I.R.S.
Employer
Identification
No.)
|
r
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
r
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
r
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
r
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Class
C Convertible
Preferred
Stock
|
Common
Stock
|
Additional
paid-in
|
Stock
Subscription
|
Minority
|
Accumulated
|
Unrealized
Depreciation
of
|
||||||||||||||||||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Par
Value
|
capital
|
Receivable
|
Interest
|
Deficit
|
Investments
|
Total
|
|||||||||||||||||||||||||||||||
Balance,
June 30, 2005
|
10,000 | $ | 10,000 | 55,837 | $ | 56 | $ | 17,316,337 | $ | (4,760 | ) | $ | - | $ | (17,207,468 | ) | $ | (657,328 | ) | $ | (543,163 | ) | ||||||||||||||||||
Change
in reporting entity status
|
(10,000 | ) | (10,000 | ) | - | - | 1,925,504 | 4,760 | (803,530 | ) | (181,959 | ) | 657,328 | 1,592,103 | ||||||||||||||||||||||||||
Balance,
June 30, 2005
|
- | - | 55,837 | $ | 56 | $ | 19,241,841 | $ | - | $ | (803,530 | ) | $ | (17,389,427 | ) | $ | - | $ | 1,048,940 |
1.
|
$657,328
in the unrealized depreciation of investments for the elimination of this
account.
|
2.
|
$(181,959)
in the accumulated deficit to account for the change in loss as an
operating company versus a BDC.
|
3.
|
$(803,530)
in minority interests for the capital investments in the Company’s
subsidiaries from unrelated
parties.
|
4.
|
$4,760
in stock subscription receivable to eliminate this
account.
|
5.
|
$1,925,504
in the additional paid in capital for the net effect of the change in the
reporting entity pursuant to SFAS no. 154; $2,240,163 for the effect of
the issuance of common stock for the escrow/exchange agreements, $(23,583)
for the effect of the common shares issued with the exchange agreement and
$(291,076) for the net effect of the disposal of the assets of the Company
prior to the exchange agreement in October
2005.
|
6.
|
$(10,000)
for the elimination of the Class C Convertible Preferred
Stock.
|
2007
|
2007
|
|||||||||||
As
Corrected
|
Change
|
|||||||||||
Current
assets
|
||||||||||||
Cash
and cash equivalents
|
$ | 542,336 | $ | 542,336 | $ | - | ||||||
Accounts
receivable
|
323,493 | 323,493 | - | |||||||||
Inventory
|
2,132,820 | 2,132,820 | - | |||||||||
Total
current assets
|
2,998,649 | 2,998,649 | - | |||||||||
- | ||||||||||||
Equipment,
net of depreciation
|
100,000 | - | 100,000 | |||||||||
Total
property and equipment
|
100,000 | - | 100,000 | |||||||||
- | ||||||||||||
Other
assets
|
- | |||||||||||
Capitalized
costs and permits
|
- | - | - | |||||||||
Research
vessel
|
- | 125,000 | (125,000 | ) | ||||||||
Licenses
and permits, net of amortization
|
1,480,946 | 1,682,916 | (201,970 | ) | ||||||||
Investments,
net of allowance of $173,868
|
51,962 | 51,962 | - | |||||||||
Notes
receivable, net of allowance of $832,849
|
- | - | - | |||||||||
Total
other assets
|
1,532,908 | 1,859,878 | (326,970 | ) | ||||||||
Total
assets
|
$ | 4,631,557 | $ | 4,858,527 | $ | (226,970 | ) | |||||
Liabilities and
Deficiency in Assets
|
||||||||||||
Current
liabilities
|
||||||||||||
Accounts
payable and accrued expenses
|
$ | 752,657 | $ | 752,657 | $ | - | ||||||
Related
party notes payable
|
3,459,359 | 3,459,359 | - | |||||||||
Due
to related parties
|
1,237,726 | 1,237,726 | - | |||||||||
Convertible
notes payable
|
1,000,000 | 1,000,000 | - | |||||||||
Debentures
payable
|
99,174 | 99,174 | - | |||||||||
Total
current liabilities
|
6,548,916 | 6,548,916 | - | |||||||||
Total
liabilities
|
6,548,916 | 6,548,916 | - | |||||||||
- | ||||||||||||
Commitments
and contingencies
|
- | - | - | |||||||||
Deficiency in
assets
|
||||||||||||
Class
A - Preferred stock, no par value, 10,000 shares authorized,
none
issued and outstanding
|
- | - | - | |||||||||
Class
B - Preferred stock, no par value, 10,000 shares authorized,
none
issued and outstanding
|
- | - | - | |||||||||
Class
C - Convertible Preferred stock, $.001 par value, 10,000 shares
authorized,
none
issued and outstanding
|
- | - | - | |||||||||
Class
D - Preferred stock, no par value, 10,000 shares authorized,
none
issued and outstanding
|
- | - | - | |||||||||
Preferred
stock - Series A, $0 par value, 100,000,000 shares
authorized;
|
- | |||||||||||
none
issued and outstanding as of June 30, 2007
|
- | - | - | |||||||||
Common
stock - $.001 par value, 250,000,000,000 shares authorized;
29,842,017
issued and outstanding
|
29,842 | 29,842 | - | |||||||||
Additional
paid-in capital
|
20,119,147 | 19,672,744 | 446,403 | |||||||||
Minority
interest
|
(803,530 | ) | (803,530 | ) | - | |||||||
Accumulated
deficit
|
(21,262,818 | ) | (20,589,445 | ) | (673,373 | ) | ||||||
Total
deficiency in assets
|
(1,917,359 | ) | (1,690,389 | ) | (226,970 | ) | ||||||
- | ||||||||||||
Total
liabilities and deficiency in assets
|
$ | 4,631,557 | $ | 4,858,527 | $ | (226,970 | ) |
See
accompanying notes to consolidated financial statements, which are an
integral part of the financial statements.
|
- | |||||||||||
A
- Entry to reclassify the research vessel from other assets to property
and equipment
|
||||||||||||
B -
To record $25,000 in depreciation expense for the research vessel that was
available for use during the fiscal year ended June 30,
2007
|
||||||||||||
C -
To record the $201,970 for the amortization of the licenses and permits
owned by the Company for the fiscal year ended June 30,
2007
|
||||||||||||
D -
To record the $25,000 in depreciation expenses for the research vessel and
the $201,970 for the amortization of the
|
||||||||||||
permits
for the fiscal year ended June 30,
2007
|
2007
|
2007
|
|||||||||||||||
As
Corrected
|
Change
|
|||||||||||||||
Revenue
|
$ | 1,860,442 | $ | 1,860,442 | $ | - | ||||||||||
Cost
of sales
|
1,474,632 | 1,474,632 | - | |||||||||||||
Gross
profit
|
385,810 | 385,810 | - | |||||||||||||
Operating
expenses
|
- | |||||||||||||||
Salaries
and wages
|
562,547 | 116,144 |
A
|
446,403 | ||||||||||||
General
and administrative
|
585,304 | 585,304 | - | |||||||||||||
Legal
and professional fees
|
318,497 | 318,497 | - | |||||||||||||
Total
operating expenses
|
1,466,348 | 1,019,945 | 446,403 | |||||||||||||
Loss
from operations
|
(1,080,538 | ) | (634,135 | ) | (446,403 | ) | ||||||||||
Other income
(expenses)
|
||||||||||||||||
Depreciation
and amortization
|
(226,970 | ) | - |
B
|
(226,970 | ) | ||||||||||
Interest
income
|
1,351 | 1,351 | - | |||||||||||||
Interest
expense
|
(144,532 | ) | (144,532 | ) | - | |||||||||||
Total
other (income) expenses
|
(370,151 | ) | (143,181 | ) | (226,970 | ) | ||||||||||
Operating
loss before income taxes
|
(1,450,689 | ) | (777,316 | ) | (673,373 | ) | ||||||||||
Provision
for income taxes
|
- | - | - | |||||||||||||
Net
loss
|
$ | (1,450,689 | ) | $ | (777,316 | ) |
C
|
(673,373 | ) | |||||||
Net loss per common
share
|
||||||||||||||||
Basic
|
(0.05 | ) | $ | (0.03 | ) |
D
|
$ | (0.02 | ) | |||||||
Diluted
|
$ | (0.05 | ) | $ | (0.03 | ) | $ | (0.02 | ) | |||||||
Weighted average of
common shares outstanding
|
||||||||||||||||
Basic
|
27,580,209 | 27,580,209 | - | |||||||||||||
Diluted
|
30,132,628 | 30,132,628 | - |
A
-
|
The
accrued and unpaid salaries and expenses of certain officers and directors
increase the operating expenses by $446.403. This amount was
adjusted through additional paid in capital to reflect the write-off of
the accrued and unpaid salaries and expenses of certain officers and
directors on June 30, 2007.
|
B
-
|
For
the fiscal year ended June 30, 2007, the $226,970 in depreciation and
amortization is as follows: $25,000 in depreciation for the research
vessel and the $201,970 is for the amortization of the licenses and
permits owned by the Company. See Note 4 for a description if
the fixed assets and Note 5 for a description of the licenses and
permits
|
C
-
|
For
the fiscal year ended June 30, 2007, the net loss increased by $673,373
for these corrections.
|
D
-
|
For
the fiscal year ended June 30, 2007, the net effect of the corrections was
$(0.02) on the basic and diluted net loss per common share of the
Company.
|
2006
|
2006
|
||||||||||||||
As
Corrected
|
Change
|
||||||||||||||
Current
assets
|
|||||||||||||||
Cash
and cash equivalents
|
$ | 570 | $ | 570 | $ | - | |||||||||
Inventory
|
1,614,004 | - | 1,614,004 | ||||||||||||
Total
current assets
|
1,614,574 | 570 | 1,614,004 | ||||||||||||
- | |||||||||||||||
Other
assets
|
- | ||||||||||||||
Capitalized
costs and permits
|
- | 3,463,890 | A | (3,463,890 | ) | ||||||||||
Research
vessel
|
- | - | - | ||||||||||||
Licenses
and permits, net of amortization
|
1,682,916 | - | 1,682,916 | ||||||||||||
Investments,
net of allowance of $173,868
|
- | - | - | ||||||||||||
Notes
receivable, net of allowance of $832,849
|
- | - | - | ||||||||||||
Total
other assets
|
1,682,916 | 3,463,890 | (1,780,974 | ) | |||||||||||
Total
assets
|
$ | 3,297,490 | $ | 3,464,460 | $ | (166,970 | ) | ||||||||
Current
liabilities
|
|||||||||||||||
Accounts
payable and accrued expenses
|
$ | 347,528 | $ | 347,528 | $ | - | |||||||||
Related
party notes payable
|
2,583,955 | 2,583,955 | - | ||||||||||||
Due
to related parties
|
817,929 | 817,929 | - | ||||||||||||
Convertible
notes payable
|
800,000 | 800,000 | - | ||||||||||||
Debentures
payable
|
121,840 | 121,840 | - | ||||||||||||
Total
current liabilities
|
4,671,252 | 4,671,252 | - | ||||||||||||
Total
liabilities
|
4,671,252 | 4,671,252 | - | ||||||||||||
- | |||||||||||||||
Commitments
and contingencies
|
- | - | - | ||||||||||||
Deficiency in
assets
|
|||||||||||||||
Common
stock - $.001 par value, 250,000,000,000 shares authorized;
26,203,166
issued and outstanding
|
26,203 | 26,203 | - | ||||||||||||
Additional
paid-in capital
|
19,215,694 | 19,215,694 | - | ||||||||||||
Minority
interest
|
(803,530 | ) | (803,530 | ) | - | ||||||||||
Accumulated
deficit
|
(19,812,129 | ) | (19,645,159 | ) | B | (166,970 | ) | ||||||||
Total
deficiency in assets
|
(1,373,762 | ) | (1,206,792 | ) | (166,970 | ) | |||||||||
- | |||||||||||||||
Total
liabilities and deficiency in assets
|
$ | 3,297,490 | $ | 3,464,460 | $ | (166,970 | ) |
A
-
|
The
capitalized costs and permits are being reclassified to inventory and
permits at the earliest date possible pursuant to SFAS no.
154. These reclassifications had no effect on the net loss for
the fiscal year ended June 30, 2006
|
B
-
|
The
amortization expense of $166,970 is being recorded for the amortization of
the licenses and permits for the fiscal year ended June 30,
2006. The $166,970 increased the net loss for the fiscal year
ended June 30, 2006
|
2006
|
2006
|
||||||||||||
As
Corrected
|
Change
|
||||||||||||
Revenue
|
$ | - | $ | - | $ | - | |||||||
Cost
of sales
|
- | - | - | ||||||||||
Gross
profit
|
- | - | - | ||||||||||
Operating
expenses
|
- | ||||||||||||
Termination of
employment and consulting agreements
|
600,000 | 600,000 | - | ||||||||||
Salaries
and wages
|
802,680 | 802,680 | - | ||||||||||
General
and administrative
|
507,800 | 507,800 | - | ||||||||||
Legal
and professional fees
|
304,978 | 304,978 | - | ||||||||||
Total
operating expenses
|
2,215,458 | 2,215,458 | - | ||||||||||
Loss
from operations
|
(2,215,458 | ) | (2,215,458 | ) | - | ||||||||
Other income
(expenses)
|
|||||||||||||
Depreciation
and amortization
|
(166,970 | ) | A | (166,970 | ) | ||||||||
Interest
income
|
- | - | - | ||||||||||
Interest
expense
|
(40,184 | ) | (40,184 | ) | - | ||||||||
Total
other (income) expenses
|
(207,154 | ) | (40,184 | ) | (166,970 | ) | |||||||
Operating
loss before income taxes
|
(2,422,612 | ) | (2,255,642 | ) | (166,970 | ) | |||||||
Provision
for income taxes
|
- | - | - | ||||||||||
Net
loss
|
$ | (2,422,612 | ) | $ | (2,255,642 | ) | $ | (166,970 | ) | ||||
Net loss per common
share
|
|||||||||||||
Basic
|
(0.09 | ) | $ | (0.08 | ) | B | (0.01 | ) | |||||
Diluted
|
$ | (0.09 | ) | $ | (0.08 | ) | $ | (0.01 | ) | ||||
Weighted average of
common shares outstanding
|
|||||||||||||
Basic
|
28,022,592 | 28,022,592 | - | ||||||||||
Diluted
|
28,022,592 | 28,022,592 | - |
A
-
|
Amortization
expense of $166,970 is being recorded for the amortization of the licenses
and permits for the fiscal year ended June 30, 2006. The
$166.970 increased the net loss for the fiscal year ended June 30,
2006
|
B
-
|
For
the fiscal year ended June 30, 2006, the net effect of the correction was
an increase of $0.01 on the basic and diluted net loss per common share of
the Company.
|
SOVEREIGN EXPLORATION ASSOCIATES INTERNATIONAL, INC. | |||
November
14, 2008
|
By:
|
/s/ Robert D. Baca | |
Robert D. Baca, Chief Executive Officer | |||