Sovereign Exploration Associates Form 8-K as filed October 19, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 13, 2006
SOVEREIGN EXPLORATION ASSOCIATES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission File Number 333-29903
Utah 30-0123229
(State of incorporation) (IRS Employer Identification No.)
503 Washington Avenue, Suite 2D
Newtown, PA 18940
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 968-0200
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On October 13, 2006, in connection with the filing on that date of the
Registrant's Annual Report on Form 10-K for the year ended June 30, 2006, the
Registrant concluded that its financial statements for the interim periods ended
December 31, 2005, and March 31, 2006, should no longer be relied upon because
of errors in those financial statements. Specifically, the Registrant
capitalized $600,000 in obligations incurred on October 17, 2005, and included
them in the cost and fair value of its investment in its affiliate, Historic
Discoveries, Inc., when the obligations should have been expensed as termination
of employment and consulting agreements, and it failed to record $800,000 in
notes payable, convertible debt, because it mistakenly believed that the notes
were the obligation of a subsidiary and not of the Registrant. (The Registrant,
which was then a business development company, did not consolidate its financial
statements for the year ended June 30, 2006, although it has since withdrawn its
business development company election and will consolidate its financial
statements in future periods.) In addition, the Registrant's financial
statements included errors in the numbers of outstanding shares of Common Stock,
resulting in errors in amounts reported on a per share basis.
For the Registrant's financial statements at and for the period ended December
31, 2005, as reported on the Form 10-Q/A filed May 23, 2006, the cost and fair
value of the Registrant's investment in Historic Discoveries, Inc., reported as
$1,861,410, should have been reported as $1,261,410, and the following line
items have been restated as follows:
Three Months Ended December 31, 2005 Six Months Ended December 31, 2005
As Filed Corrected As Filed Corrected
Termination of employment and
consulting agreements $ - $ 600,000 $ - $ 600,000
Total operating expenses $ 434,634 $ 1,034,634 $ 732,094 $ 1,332,094
Net operating (loss) $ (360,745) $ (960,745) $ (214,209) $ (814,209)
Net decrease in net assets
resulting from operations $ (3,444,351) $ (4,044,351) $ (3,550,975) $ (4,150,975)
Net operating loss per common
share (basic and diluted)
Basic $ (0.0168) $ (0.0197)
Diluted $ (0.0168) $ (0.0197)
Net loss per common share
(basic and diluted)
Basic $ (0.1608) $ (0.3270)
Diluted $ (0.1608) $ (0.3270)
Weighted average shares of
common stock outstanding
Basic 21,416,875 10,858,934
Diluted 21,416,875 10,858,934
At December 31, 2005
As Filed Corrected
Investments in and advances to
affiliates $ 2,661,410 $ 2,061,410
Total assets $ 2,738,915 $ 2,138,915
Notes payable, convertible
debt $ - $ 800,000
Total liabilities $ 1,070,061 $ 1,870,061
Capital in excess of par value $ 20,072,488 $ 19,272,488
Accumulated undistributed net
(loss) $ (17,433,120) $ (18,033,120)
Total shareholders' equity $ 1,668,854 $ 268,854
Total liabilities and
shareholders' equity $ 2,738,915 $ 2,138,915
Shares outstanding
(split-adjusted) 26,203,040 2,620,304
Net asset value per share $ 0.0637 $ 0.1026
For the Registrant's financial statements at and for the period ended March 31,
2006, as reported on the Form 10-Q filed May 23, 2006, the cost and fair value
of the Registrant's investment in Historic Discoveries, Inc., reported as
$1,873,010, should have been reported as $1,273,010, and the following line
items have been restated as follows:
Nine Months Ended March 31, 2006
As Filed Corrected
Termination of employment and
consulting agreements $ - $ 600,000
Total operating expenses $ 1,050,734 $ 1,650,734
Net operating (loss) $ (487,849) $ (1,087,849)
Net decrease in net assets
resulting from operations $ (3,824,615) $ (4,424,615)
Net operating loss per common
share (basic and diluted)
Basic $ (0.0307) $ (0.1214)
Diluted $ (0.0307) $ (0.1214)
Net loss per common share
(basic and diluted)
Basic $ (0.2406) $ (0.4936)
Diluted $ (0.2406) $ (0.4936)
Weighted average shares of
common stock outstanding
Basic 15,898,969 8,964,276
Diluted 15,898,969 8,964,276
At March 31, 2006
As Filed Corrected
Investments in and advances
to affiliates $ 2,707,070 $ 2,107,070
Total assets $ 2,818,821 $ 2,218,821
Notes payable, convertible
debt $ - $ 800,000
Total liabilities $ 1,522,567 $ 2,322,567
Capital in excess of par
value $ 20,322,917 $ 19,522,917
Accumulated undistributed net
(loss) $ (18,056,149) $ (18,656,149)
Total shareholders' equity $ 1,296,254 $ (103,746)
Total liabilities and
shareholders' equity $ 2,818,821 $ 2,218,821
Shares outstanding 26,203,040 26,203,166
Net asset value per share $ 0.0637 $ (0.0040)
The Registrant's management has discussed the matters disclosed in this filing
with the Registrant's independent accountant, Baumann, Raymondo & Company PA.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
SOVEREIGN EXPLORATION ASSOCIATES
INTERNATIONAL, INC.
By: /s/Robert D. Baca
Robert D. Baca
President and Chief Executive Officer
Dated: October 18, 2006