Utah
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30-0123229
|
|
(State
or other jurisdiction of incorporation )
|
(IRS
Employer Identification No.)
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PAGE
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PART
I - FINANCIAL INFORMATION
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|
Item
1. Financial Statements
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F-1
|
Item
2. Management's Discussion and Analysis or Plan of
Operation
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2
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Item
3. Controls and Procedures
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5
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PART
II - OTHER INFORMATION
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|
Item
1. Legal Proceedings
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6
|
Item
2. Unregistered Sale of Equity Securities and Use of
Proceeds
|
7
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Item
3. Defaults Upon Senior Securities
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7
|
Item
4. Submission of Matters to a Vote of Security Holders
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7
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Item
5. Other Information
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7
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Item
6. Exhibits
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7
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SIGNATURES
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND
SUBSIDIARIES
|
||
CONSOLIDATED
BALANCE SHEET
|
||
March
31, 2008
|
||
(Unaudited)
|
|
|
Assets
|
||||
Current
assets
|
||||
Cash
and cash equivalents
|
$
|
10,775
|
||
Accounts
receivable, net of allowance of $93,728
|
-
|
|||
Total
current assets
|
10,775
|
|||
Other
assets
|
||||
Capitalized
costs
|
3,308,936
|
|||
Permits
|
1,009,851
|
|||
Research
vessel
|
125,000
|
|||
Equipment,
net of depreciation of $3,337
|
11,457
|
|||
Investments,
net of allowance of $173,868
|
51,962
|
|||
Notes
receivable, net of allowance of $832,849
|
-
|
|||
Total
other assets
|
4,507,206
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|||
Total
assets
|
$
|
4,517,981
|
||
Liabilities
and Deficiency in Assets
|
||||
Current
liabilities
|
||||
Accounts
payable and accrued expenses
|
$
|
539,901
|
||
Related
party notes payable
|
3,558,438
|
|||
Due
to related parties
|
1,449,961
|
|||
Notes
payable
|
1,136,776
|
|||
Total
current liabilities
|
6,685,076
|
|||
Total
liabilities
|
6,685,076
|
|||
Commitments
and contingencies
|
-
|
|||
Deficiency
in Assets
|
||||
Preferred
stock, Series A, $0 par value, 100,000,000 shares authorized; 10,000,000
issued and outstanding
|
-
|
|||
Common
stock, $.001 par value, 250,000,000,000 shares authorized; 36,368,671
issued and outstanding
|
36,369
|
|||
Additional
paid-in capital
|
19,566,452
|
|||
Stock
subscription receivable
|
(30,000
|
)
|
||
Cumulative
comprehensive income
|
(11,799
|
)
|
||
Minority
interest
|
(803,530
|
)
|
||
Accumulated
deficit
|
(20,924,587
|
)
|
||
Total
deficiency in assets
|
(2,167,095
|
)
|
||
Total
liabilities and deficiency in assets
|
$
|
4,517,981
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND
SUBSIDIARIES
|
||
CONSOLIDATED
STATEMENT OF OPERATIONS
|
||
(Unaudited)
|
|
|
For the three months ended
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For the nine months ended
|
||||||||||||
March 31,
|
March 31,
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||||||||||||
2008
|
2007
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2008
|
2007
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
Revenue
|
$
|
-
|
$
|
79,089
|
$
|
395,550
|
$
|
421,210
|
|||||
Cost
of sales
|
-
|
65,665
|
240,250
|
252,248
|
|||||||||
Gross
profit
|
-
|
13,424
|
155,300
|
168,962
|
|||||||||
Operating
expenses
|
|||||||||||||
Salaries
and wages
|
-
|
20,178
|
122,774
|
189,506
|
|||||||||
General
and administrative
|
391,079
|
37,752
|
731,981
|
426,970
|
|||||||||
Legal
and professional fees
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40,495
|
74,111
|
245,739
|
258,107
|
|||||||||
Total
operating expenses
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431,574
|
132,041
|
1,100,494
|
874,583
|
|||||||||
Loss
from operations
|
(431,574
|
)
|
(118,617
|
)
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(945,194
|
)
|
(705,621
|
)
|
|||||
Other
income (expenses)
|
|||||||||||||
Stock
issued - settlement agreement
|
-
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(364,000
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)
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-
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(364,000
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)
|
|||||||
Depreciation
and amortization
|
(1,250
|
)
|
-
|
(5,255
|
)
|
-
|
|||||||
Interest
income
|
-
|
-
|
518
|
-
|
|||||||||
Interest
expense
|
(41,941
|
)
|
(75,411
|
)
|
(124,080
|
)
|
(121,136
|
)
|
|||||
Total
other (income) expense
|
(43,191
|
)
|
(439,411
|
)
|
(128,817
|
)
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(485,136
|
)
|
|||||
Loss
before income taxes
|
(474,764
|
)
|
(558,028
|
)
|
(1,074,011
|
)
|
(1,190,757
|
)
|
|||||
Provision
for income taxes
|
-
|
-
|
-
|
-
|
|||||||||
Net
loss
|
$
|
(474,764
|
)
|
$
|
(558,028
|
)
|
$
|
(1,074,011
|
)
|
$
|
(1,190,757
|
)
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|
Net
loss per common share
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|||||||||||||
Basic
|
(0.01
|
)
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(0.02
|
)
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(0.04
|
)
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(0.05
|
)
|
|||||
Diluted
|
(0.01
|
)
|
(0.02
|
)
|
(0.04
|
)
|
(0.04
|
)
|
|||||
Weighted
average of common shares outstanding
|
|||||||||||||
Basic
|
35,122,844
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26,203,166
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27,580,209
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26,203,166
|
|||||||||
Diluted
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75,122,844
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27,113,166
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30,132,628
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27,113,166
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|||||||||
Dividends
declared per common share
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
||
(Unaudited)
|
|
|
For the nine months ended
|
|||||||
March 31,
|
|||||||
2008
|
2007
|
||||||
(Unaudited)
|
(Unaudited)
|
||||||
Operating activities:
|
|||||||
Net
loss
|
$
|
(1,074,011
|
)
|
$
|
(1,190,757
|
)
|
|
Adjustments
to reconcile net loss from operations to net cash used in operating
activities:
|
|||||||
Cumulative
comprehensive income
|
(11,799
|
)
|
-
|
||||
Depreciation
and amortization
|
3,337
|
-
|
|||||
Stock
issued for services
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320,530
|
-
|
|||||
(Increase)
decrease in:
|
|||||||
Accounts
receivable
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323,493
|
(427,742
|
)
|
||||
Increase
(decrease) in:
|
|||||||
Accounts
payable and accrued expenses
|
(206,486
|
)
|
490,461
|
||||
Due
to related parties
|
212,235
|
298,069
|
|||||
Net
cash used in operating activities
|
(432,701
|
)
|
(829,969
|
)
|
|||
Investing
activities:
|
|||||||
Capitalized
costs
|
(336,081
|
)
|
(988,997
|
)
|
|||
Investments
and loans receivable
|
-
|
(51,962
|
)
|
||||
Purchase
of equipment
|
(14,794
|
)
|
-
|
||||
Net
cash used in investing activities
|
(350,875
|
)
|
(1,040,959
|
)
|
|||
Financing
activities:
|
|||||||
Stock
subscription receivable
|
30,000
|
-
|
|||||
Proceeds
from issuance of common stock
|
60,000
|
895,999
|
|||||
Proceeds
from exercise of warrants - common stock
|
50,000
|
-
|
|||||
Distributions
to shareholders - Lavelle
|
-
|
(10,150
|
)
|
||||
Proceeds
from related party notes payable
|
112,015
|
1,092,377
|
|||||
Payments
on related party notes payable
|
-
|
(156,983
|
)
|
||||
Net
cash provided by financing activities
|
252,015
|
1,821,243
|
|||||
Net
decrease in cash and cash equivalents
|
(531,561
|
)
|
(49,685
|
)
|
|||
Cash
and cash equivalents, beginning of period
|
542,336
|
115,454
|
|||||
Cash
and cash equivalents, end of period
|
$
|
10,775
|
$
|
65,769
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Interest
paid
|
$
|
-
|
$
|
263
|
|||
Taxes
paid
|
-
|
-
|
Statutory
federal income tax rate
|
34
|
%
|
||
State
taxes – net of federal benefits
|
5
|
%
|
||
Valuation
allowance
|
39
|
%
|
||
Income
tax rate – net
|
0
|
%
|
Demand
note payable - advances to Sovereign Exploration Associates International,
Inc.
|
56,719
|
|||
Demand
Note payable of $500,000 plus accrued interest of $3,444 per month
as a
direct pass through from Nova Savings Bank - origination date was
July 10,
2006 (b)
|
571,884
|
|||
Term
Note payable of $274,009 due June 13, 2008 plus at 6% per annum for
the
acquisition of LeChameau LeChameau Explorations Limited – June 13,
2007
|
292,736
|
|||
Demand
note payable of $350,000 plus accrued interest at 6% per annum for
the
purchase of the original permits
|
433,341
|
|||
Demand
Note payable of $250,000 plus accrued interest at 6% per annum for
the
balance of the Fantome Cove Project
|
275,274
|
|||
Demand
Note payable of $160,000 due on November 15, 2007 plus accrued interest
of
the lesser of 0.9% or the legal rate under Texas law – origination
date was November 15, 2006 (a)
|
162,533
|
|||
Demand
note payable - advances to Interspace Explorations Limited plus accrued
interest at 6% per annum
|
515,882
|
|||
Demand
note payable - advances to Sea Research, Inc.
|
574,355
|
|||
Demand
Note payable of $600,000 due on November 15, 2007 plus accrued interest
of
the lesser of 0.9% or the legal rate under Texas law – origination
date was November 15, 2006 (a)
|
675,653
|
|||
Total
related party notes payable - all current
|
$
|
3,558,438
|
|
|
Fair
|
|||||
Market
|
|||||||
Name of Company
|
Cost
|
Value
|
|||||
Gulf
Coast Records, LLC
|
|||||||
Minority
Investment (49%) and Note Receivable
|
$
|
1,006,717
|
$
|
-
|
|||
Reds
Caribbean - held by Lavelle Holdings, Inc.
|
|||||||
Minority
Investment (30%)
|
$
|
51,962
|
$
|
51,962
|
|||
Totals
|
$
|
1,058,679
|
$
|
51,962
|
May
14, 2008
|
By:
|
/s/
Robert D. Baca
|
Date
|
Robert
D. Baca
|
|
Chief
Executive Officer
|
||
May
14, 2008
|
By:
|
/s/
Martin Thorp
|
Date
|
Martin
Thorp
|
|
Chief
Financial Officer
|