x
|
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
|
Utah
|
30-0123229
|
(State
or other jurisdiction of incorporation )
|
(IRS
Employer Identification No.)
|
(F/K/A
- CALI Holdings, Inc.)
|
||
CONSOLIDATED
BALANCE SHEETS
|
||
DECEMBER
31, 2006 AND JUNE 30, 2006
|
12/31/2006
|
06/30/2006
|
||||||
UNAUDITED
|
RESTATED
|
||||||
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
5,955
|
$
|
570
|
|||
Total
current assets
|
5,955
|
570
|
|||||
Other
assets
|
|||||||
Investments,
net of allowance of $173,868
|
-
|
-
|
|||||
Notes
receivable, net of allowance of $832,849
|
-
|
-
|
|||||
Capitalized
costs and permits
|
2,867,615
|
2,365,870
|
|||||
Total
other assets
|
2,867,615
|
2,365,870
|
|||||
Total
assets
|
$
|
2,873,570
|
$
|
2,366,440
|
|||
Liabilities
and Shareholders' Equity (Deficit)
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable and accrued expenses
|
$
|
478,681
|
$
|
473,934
|
|||
Due
to related parties
|
1,297,543
|
817,929
|
|||||
Notes
payable
|
126,523
|
121,840
|
|||||
Total
current liabilities
|
1,902,747
|
1,413,703
|
|||||
Long-term
liabilities
|
|||||||
Related
party note payables
|
2,678,406
|
2,126,665
|
|||||
Notes
payable, convertible debt
|
-
|
800,000
|
|||||
Total
long-term liabilities
|
2,678,406
|
2,926,665
|
|||||
Total
liabilities
|
4,581,153
|
4,340,368
|
|||||
Commitments
and contingencies
|
-
|
-
|
|||||
Shareholders'
equity (deficit)
|
|||||||
Common
stock, $.001 par value, 250,000,000,000 shares authorized and 26,203,166
issued and outstanding as of June 30, 2006; 27,941,166 issued and
outstanding as of December 31, 2006
|
27,913
|
26,203
|
|||||
Additional
paid-in capital
|
19,038,949
|
17,876,659
|
|||||
Minority
interest
|
(803,530
|
)
|
(803,530
|
)
|
|||
Accumulated
deficit
|
(19,970,915
|
)
|
(19,073,260
|
)
|
|||
Total
shareholders' equity (deficit)
|
(1,707,583
|
)
|
(1,973,928
|
)
|
|||
Total
liabilities and shareholders' equity (deficit)
|
$
|
2,873,570
|
$
|
2,366,440
|
(F/K/A
- CALI Holdings, Inc.)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
FOR
THE SIX MONTHS ENDED DECEMBER 31, 2006
|
|
UNAUDITED
|
12/31/2006
|
||||
REVENUE
|
$
|
-
|
||
OPERATING
EXPENSES
|
||||
Salaries
and wages
|
148,710
|
|||
General
and administrative
|
146,072
|
|||
Professional
fees
|
190,149
|
|||
Total
operating expenses
|
484,931
|
|||
OTHER
INCOME (EXPENSE)
|
||||
Stock
issued in conjunction with settlement agreement
|
(364,000
|
)
|
||
Interest
expense
|
(48,724
|
)
|
||
Total
other income (expense)
|
(412,724
|
)
|
||
OPERATING
LOSS BEFORE INCOME TAXES
|
(897,655
|
)
|
||
Provision
for income taxes
|
-
|
|||
LOSS
BEFORE DEPRECIATION ON INVESTMENTS
|
(897,655
|
)
|
||
Net
unrealized depreciation on investments
|
-
|
|||
NET
LOSS
|
$
|
(897,655
|
)
|
|
NET
OPERATING LOSS PER COMMON SHARE:
|
||||
Basic
|
$
|
(0.0322
|
)
|
|
Diluted
|
$
|
(0.0322
|
)
|
|
NET
LOSS PER COMMON SHARE
|
||||
Basic
|
$
|
(0.0322
|
)
|
|
Diluted
|
$
|
(0.0322
|
)
|
|
WEIGHTED
AVERAGE SHARES OF COMMON
|
||||
Basic
|
27,913,166
|
|||
Diluted
|
27,913,166
|
|||
DIVIDENDS
DECLARED PER COMMON SHARE
|
$
|
-
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
||||||||||||||
(F/K/A
- CALI Holdings, Inc.)
|
||||||||||||||
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||
FOR
THE SIX MONTHS ENDED DECEMBER 31, 2006
|
||||||||||||||
UNAUDITED
|
Additional
|
|||||||||||||||||||
Common
Stock
|
paid-in
|
Minority
|
Accumulated
|
||||||||||||||||
Shares
|
Par
value
|
capital (1)
|
interest
|
deficit (2)
|
Total
|
||||||||||||||
Balance,
June 30, 2006, restated
|
26,230,166
|
$
|
26,203
|
$
|
17,876,659
|
$
|
(803,530
|
)
|
$
|
(19,073,260
|
)
|
$
|
(1,973,928
|
)
|
|||||
Issuance
of common shares - settlement agreement
|
910,000
|
910
|
363,090
|
-
|
-
|
364,000
|
|||||||||||||
Conversion
of convertible debt to common shares
|
800,000
|
800
|
799,200
|
-
|
-
|
800,000
|
|||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(897,655
|
)
|
(897,655
|
)
|
|||||||||||
Balance,
December 31, 2006
|
27,940,166
|
$
|
27,913
|
$
|
19,038,949
|
$
|
(803,530
|
)
|
$
|
(19,970,915
|
)
|
$
|
(1,707,583
|
)
|
(1) -
Capital in excess of par value as of June 30, 2006 and includes the
Company and subsidiaries
|
|||||||||||||||||||
(2)
- Accumulated undistributed net income (loss) as of June 30,
2006
|
See
accompanying notes
|
(F/K/A
- CALI Holdings, Inc.)
|
|
STATEMENTS
OF CASH FLOWS
|
|
FOR
THE SIX MONTHS ENDED DECEMBER 31, 2006
|
|
UNAUDITED
|
12/31/2006
|
||||
Operating
activities:
|
||||
Net
loss
|
$
|
(897,655
|
)
|
|
Adjustments
to reconcile net loss from operations to
|
||||
net
cash (used in) operating activities:
|
||||
Capitalized
costs and permits
|
(501,745
|
)
|
||
Increase
(decrease) in:
|
||||
Accounts
payable and accrued expenses
|
58,154
|
|||
Due
to related parties
|
479,614
|
|||
Net
cash (used in) operating activities
|
(861,632
|
)
|
||
Financing
activities:
|
||||
Issuance
of common stock
|
364,000
|
|||
Proceeds
from related party notes payable
|
660,000
|
|||
Payments
on related party notes payable
|
(156,983
|
)
|
||
Net
cash provided by financing activities
|
867,017
|
|||
Net
increase in cash and cash equivalents
|
5,385
|
|||
Cash,
beginning of period
|
570
|
|||
Cash,
end of period
|
$
|
5,955
|
||
Supplemental
disclosure of cash flow information:
|
||||
Interest
paid
|
$
|
-
|
||
Taxes
paid
|
-
|
Additional
paid in capital
|
$
|
(550,705
|
)
|
|
Deficit
|
(425,068
|
)
|
||
Unrealized
depreciation on investments
|
1,015,273
|
|||
|
||||
Net
adjustments
|
$
|
39,500
|
1.
|
The
Company has made every reasonable effort to apply the requirement;
however, we are unable to do so.
|
2.
|
Retrospective
application of the change in accounting principle requires assumptions
about prior management’s intent in prior periods that can not now be
independently substantiated.
|
3.
|
Retrospective
application of the accounting principle requires significant estimates
of
amounts that at this time, it is impossible to distinguish objectively
information about those estimates that: (a) provides evidence of
circumstances that existed on the date(s) at which those amounts
would be
recognized, measured, or disclosed under retrospective application,
and
(b) would have been available when the financial statements for that
prior
period were issued.
|
8%
convertible debenture to an individual dated May 27, 2005 with an
initial
|
||||
principal
balance of $21,000 due no later than May 27, 2006;
outstanding
|
||||
principal
and interest. This convertible debenture is currently in
dispute.
|
$
|
24,828
|
||
5.25%
convertible debenture to a company dated June 29, 2005 with an
initial
|
||||
principal
balance of $40,000 due no later than June 29, 2008;
outstanding
|
||||
principal
and interest. This convertible debenture is currently in
dispute.
|
$
|
88,965
|
||
8%
convertible debenture to an individual dated May 18, 2005 with an
initial
|
||||
principal
balance of $21,000 due no later than May 18, 2006;
outstanding
|
||||
principal
and interest. This convertible debenture is currently in
dispute.
|
$
|
12,730
|
||
Total
notes payable, current
|
$
|
126,523
|
·
|
800,000
common shares were issued for the conversion of the convertible debt
of
$800,000. These shares are restricted under Rule
144.
|
·
|
910,000
common shares were issued pursuant
to the Settlement Agreement effective June 30, 2006. These 910,000
common
shares are subject to a Leak-Out Agreement and are
restricted under Rule 144.
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
||||||
(F/K/A
- Cali Holdings, Inc.)
|
||||||
BALANCE
SHEETS
|
December
31,
2005
|
June
30,
2005
|
||||||
(unaudited)
|
|||||||
Assets
|
|||||||
Investments
in and advances to affiliates
|
$
|
2,661,410
|
$
|
1,777,765
|
|||
Cash
and cash equivalents
|
25,130
|
31,034
|
|||||
Accounts
receivable
|
45,000
|
3,692
|
|||||
Prepaid
expenses
|
1,803
|
-
|
|||||
Fixed
assets, net of accumulated depreciation
|
-
|
9,658
|
|||||
Notes
receivable
|
-
|
439,732
|
|||||
Other
assets
|
-
|
254,207
|
|||||
Goodwill
|
-
|
489,000
|
|||||
Security
deposit
|
5,572
|
5,572
|
|||||
Total
assets
|
$
|
2,738,915
|
$
|
3,010,660
|
|||
Liabilities
and Shareholders' Equity
|
|||||||
Accounts
payable and accrued expenses
|
$
|
307,883
|
$
|
77,989
|
|||
Related
party note payables
|
645,100
|
-
|
|||||
Notes
payable
|
117,078
|
499,900
|
|||||
Total
liabilities
|
1,070,061
|
577,889
|
|||||
Commitments
and contingencies
|
|||||||
Shareholders'
equity
|
|||||||
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
issued and
outstanding
|
10,000
|
10,000
|
|||||
Class
D - Preferred stock, no par value, 10,000 shares authorized, none
issued and outstanding
|
-
|
-
|
|||||
Common
stock, $.001 par value, 250,000,000,000 shares authorized and
26,203,040
issued as of December 31, 2005; 2,000,000,000 shares authorized;
53,430
outstanding as of June 30, 2005
|
26,203
|
53
|
|||||
Capital
in excess of par value
|
20,072,488
|
17,316,340
|
|||||
Stock
subscription receivable
|
-
|
(4,760
|
)
|
||||
Accumulated
undistributed net income (loss)
|
(17,433,120
|
)
|
(14,231,534
|
)
|
|||
Net
unrealized depreciation of investments
|
(1,006,717
|
)
|
(657,328
|
)
|
|||
Total
shareholders' equity
|
1,668,854
|
2,432,771
|
|||||
Total
liabilities and shareholders' equity
|
$
|
2,738,915
|
$
|
3,010,660
|
|||
Net
asset value per share
|
$
|
0.0637
|
$
|
45.53
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
|||||||||
(F/K/A
- Cali Holdings, Inc.)
|
|||||||||
Statements
of Operations
|
|||||||||
(unaudited)
|
Three
Months ended
|
|
Six
Months ended
|
|
||||||||||
|
|
December
31,
|
|
December
31,
|
|
||||||||
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||
OPERATING
INCOME:
|
|||||||||||||
Interest and dividend income: | |||||||||||||
Control
investments
|
$
|
16,768
|
17,622
|
$
|
40,283
|
$
|
31,315
|
||||||
Total
interest and dividend income
|
16,768
|
17,622
|
40,283
|
31,315
|
|||||||||
Fee
and other income:
|
|||||||||||||
Control
investments
|
50,000
|
423,067
|
425,000
|
612,482
|
|||||||||
Other
|
7,121
|
-
|
52,602
|
-
|
|||||||||
Total
fee and other income
|
57,121
|
423,067
|
477,602
|
612,482
|
|||||||||
Total
operating income
|
73,889
|
440,689
|
517,885
|
643,797
|
|||||||||
COST
OF GOODS SOLD
|
-
|
131,414
|
-
|
196,053
|
|||||||||
OPERATING
EXPENSES
|
|||||||||||||
Depreciation
and amortization
|
-
|
17,354
|
615
|
33,819
|
|||||||||
Salaries
and wages
|
156,506
|
214,426
|
302,692
|
362,625
|
|||||||||
General
and administrative
|
254,407
|
187,760
|
355,389
|
545,931
|
|||||||||
Interest
|
311
|
43,202
|
1,242
|
87,526
|
|||||||||
Professional
fees
|
23,410
|
58,655
|
72,156
|
170,463
|
|||||||||
Other
|
-
|
-
|
-
|
15,089
|
|||||||||
Total
operating expenses
|
434,634
|
521,397
|
732,094
|
1,215,453
|
|||||||||
OPERATING
(LOSS) BEFORE INCOME TAXES
|
(360,745
|
)
|
(212,122
|
)
|
(214,209
|
)
|
(767,709
|
)
|
|||||
Provision
for income taxes
|
-
|
(26,544
|
)
|
-
|
(45,264
|
)
|
|||||||
NET
OPERATING (LOSS)
|
(360,745
|
)
|
(238,666
|
)
|
(214,209
|
)
|
(812,973
|
)
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
|||||||||
(F/K/A
- Cali Holdings, Inc.)
|
|||||||||
Statements
of Operations, continued
|
|||||||||
(unaudited)
|
Three
Months ended
|
|
Six
Months ended
|
|
||||||||||
|
|
December
31,
|
|
December
31,
|
|||||||||
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||||
Net
realized gain (loss) on investments
|
|||||||||||||
Control
investments
|
(2,525,274
|
)
|
-
|
(2,620,117
|
)
|
-
|
|||||||
Total
net realized gain (loss) on investments
|
(2,525,274
|
)
|
-
|
(2,620,117
|
)
|
-
|
|||||||
Net
unrealized (depreciation) on investments
|
|||||||||||||
Portfolio
company investments
|
(558,332
|
)
|
(78,071
|
)
|
(716,649
|
)
|
(7,071
|
)
|
|||||
Total
net unrealized (depreciation) on investments
|
(558,332
|
)
|
(78,071
|
)
|
(716,649
|
)
|
(7,071
|
)
|
|||||
Total
net loss on investments
|
(3,083,606
|
)
|
(78,071
|
)
|
(3,336,766
|
)
|
(7,071
|
)
|
|||||
NET
INCOME (LOSS) BEFORE MINORITY INTEREST
|
(3,444,351
|
)
|
(316,737
|
)
|
(3,550,975
|
)
|
(820,044
|
)
|
|||||
Minority
interest
|
-
|
(44,583
|
)
|
-
|
(161,152
|
)
|
|||||||
Total
minority interest
|
-
|
(44,583
|
)
|
(161,152
|
)
|
||||||||
NET
DECREASE IN NET ASSETS
|
|||||||||||||
RESULTING
FROM OPERATIONS
|
$
|
(3,444,351
|
)
|
$
|
(272,154
|
)
|
$
|
(3,550,975
|
)
|
$
|
(658,892
|
)
|
|
NET
OPERATING LOSS PER COMMON SHARE:
|
|||||||||||||
Basic
|
$
|
(0.0168
|
)
|
$
|
(268.16
|
)
|
$
|
(0.0197
|
)
|
$
|
(1,566.42
|
)
|
|
Diluted
|
$
|
(0.0168
|
)
|
$
|
(268.16
|
)
|
$
|
(0.0197
|
)
|
$
|
(1,566.42
|
)
|
|
NET
LOSS PER COMMON SHARE
|
|||||||||||||
Basic
|
$
|
(0.1608
|
)
|
$
|
(305.79
|
)
|
$
|
(0.3270
|
)
|
$
|
(1,269.54
|
)
|
|
Diluted
|
$
|
(0.1608
|
)
|
$
|
(305.79
|
)
|
$
|
(0.3270
|
)
|
$
|
(1,269.54
|
)
|
|
WEIGHTED
AVERAGE SHARES OF COMMON
|
|||||||||||||
STOCK
OUTSTANDING:
|
|||||||||||||
Basic
|
21,416,875
|
890
|
10,858,934
|
519
|
|||||||||
Diluted
|
21,416,875
|
890
|
10,858,934
|
519
|
|||||||||
DIVIDENDS
DECLARED PER COMMON SHARE
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
||||
(F/K/A
- Cali Holdings, Inc.)
|
||||
SCHEDULE
OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
|
||||
December
31, 2005
|
||||
(unaudited)
|
Company
|
Industry
|
|
Investment
|
|
Cost
|
|
Fair
Value
|
||||||
Historic
Discoveries, Inc.
|
Marine
Exploration
|
Common
Stock - 100%
|
|
$
|
1,861,410
|
$
|
1,861,410
|
||||||
Sovereign
Exploration Associates
|
|
||||||||||||
International
of Spain, Inc.
|
Marine
Exploration
|
Common
Stock - 100%
|
|
800,000
|
800,000
|
||||||||
|
|||||||||||||
Gulf
Coast Records, LLC
|
Recording
Label
|
Member
Interest - 49%
|
|
173,868
|
-
|
||||||||
Gulf
Coast Records, LLC
|
Recording
Label
|
Note
Receivable
|
|||||||||||
|
8%
Interest; no
|
||||||||||||
|
|
repayment
terms
|
832,849
|
-
|
|||||||||
Total
investments in and advances to affiliates
|
|
|
$
|
3,668,127
|
$
|
2,661,410
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
|||||
(F/K/A
- Cali Holdings, Inc.)
|
|||||
STATEMENTS
OF CHANGES IN NET ASSETS
|
|||||
(unaudited)
|
Six
Months Ended
|
|
||||||
|
|
December
31,
|
|
||||
|
|
2005
|
|
2004
|
|||
Operations:
|
|||||||
Net
operating (loss)
|
$
|
(214,209
|
)
|
$
|
(812,973
|
)
|
|
Net
realized gain (loss) on investments
|
(2,620,117
|
)
|
-
|
||||
Net
unrealized (depreciation) of investments
|
(716,649
|
)
|
(7,071
|
)
|
|||
Net
decrease in net assets resulting from operations
|
(3,550,975
|
)
|
(820,044
|
)
|
|||
Shareholder
distributions:
|
|||||||
Common
stock dividends
|
-
|
-
|
|||||
Net
decrease in net assets resulting from shareholder
distributions
|
-
|
-
|
|||||
Capital
share transactions:
|
|||||||
Issuance
of common stock
|
2,799,067
|
1,025,895
|
|||||
Other
|
(12,009
|
)
|
-
|
||||
Net
increase in net assets resulting from capital share
transactions
|
2,787,058
|
1,025,895
|
|||||
Total
increase (decrease) in net assets
|
(763,917
|
)
|
205,851
|
||||
Net
assets beginning of period
|
2,432,771
|
2,585,093
|
|||||
Net
assets end of period
|
$
|
1,668,854
|
$
|
2,790,944
|
|||
Net
asset value per common share
|
$
|
0.0637
|
$
|
1,358.98
|
|||
Common
shares outstanding at end of period
|
26,203,040
|
2,054
|
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
|
|||||||
(F/K/A
- Cali Holdings, Inc.)
|
|||||||
STATEMENTS
OF CASH FLOWS (Unaudited)
|
Six
Months Ended December
31, 2005 |
Six
Months Ended December
31, 2004 |
||||||
Operating
activities:
|
|||||||
Net
(decrease) in net assets resulting from operations
|
$
|
(3,550,975
|
)
|
$
|
(658,892
|
)
|
|
Adjustments
to reconcile net (decrease) in net assets resulting
|
|||||||
from
operations to net cash providing by operating activities:
|
|||||||
Net
unrealized appreciation (depreciation) on investments
|
(716,649
|
)
|
7,071
|
||||
Net
realized (gain) loss on investments
|
2,620,117
|
-
|
|||||
Deferred
income tax
|
-
|
45,264
|
|||||
Stock
issued for services
|
-
|
88,947
|
|||||
Minority
interest
|
-
|
(161,152
|
)
|
||||
Depreciation
and amortization
|
615
|
28,645
|
|||||
(Increase)
decrease in:
|
|||||||
Prepaid
expenses
|
(1,803
|
)
|
-
|
||||
Accounts
receivable
|
(41,308
|
)
|
(254,847
|
)
|
|||
Other
assets
|
254,207
|
14,002
|
|||||
Goodwill
|
489,000
|
-
|
|||||
Increase
in accounts payable and accrued expenses
|
229,893
|
59,809
|
|||||
Net
cash (used in) operating activities
|
(716,903
|
)
|
(831,153
|
)
|
|||
Investing
activities:
|
|||||||
Decrease
(increase) in notes receivable
|
(71,758
|
)
|
(571,731
|
)
|
|||
Purchase
of property and equipment
|
-
|
(26,438
|
)
|
||||
Purchase
of investments, portfolio companies
|
(2,661,410
|
)
|
(161,674
|
)
|
|||
Net
cash (used in) investing activities
|
(2,733,168
|
)
|
(759,843
|
)
|
|||
Financing
activities:
|
|||||||
Proceeds
from notes payable to related parties
|
645,100
|
845,150
|
|||||
Payment
of notes payable to related parties
|
-
|
(65,000
|
)
|
||||
Payment
of notes payable
|
-
|
(222,917
|
)
|
||||
Issuance
of common stock
|
2,799,067
|
634,474
|
|||||
Issuance
of preferred stock
|
-
|
10,000
|
|||||
Distributions
|
-
|
(1,296
|
)
|
||||
Net
cash provided by financing activities
|
3,444,167
|
1,200,411
|
|||||
Net
(decrease) in cash and cash equivalents
|
(5,904
|
)
|
(390,585
|
)
|
|||
Cash,
beginning of period
|
31,034
|
470,940
|
|||||
Cash,
end of period
|
$
|
25,130
|
$
|
80,355
|
·
|
Historic
Discoveries, Inc.
|
·
|
Sovereign
Exploration Associates International of Spain, Inc. (SEAI -
SPAIN)
|
·
|
Gulf
Coast Records, LLC
|
8%
convertible debenture to an individual dated May 27, 2005 with an
initial
principal balance of $21,000 due no later than May 27, 2006; outstanding
principal and interest
|
$
|
22,134
|
||
|
||||
5.25%
convertible debenture to Golden Gate Investors dated June 29, 2005
with an
initial principal balance of $40,000 due no later than June 29, 2008;
outstanding principal and interest...(this convertible debenture
is
currently in dispute)
|
$
|
87,647
|
||
|
||||
8%
convertible debenture to an individual dated May 18, 2005 with an
initial
principal balance of $35,000 due no later than May 18, 2006; outstanding
principal and interest
|
$
|
7,297
|
||
Total
notes payable, current
|
$
|
117,078
|
Sold
to KMA Capital Ltd. Of Texas
Sports
Nation, Inc.
Buehler
Earth & Waterworks, LLC
Brokerage
account of CALI at NevWest
TS&B
Financial Services, Inc.
Wellstone
Acquisition Corporation
TS&B
Gaming & Entertainment Corp.
TSB
Ventures, Inc.
Three
(3) Dell notebook computers
Furniture
and fixtures
Office
and computer equipment
Sold
to Kairos Holdings, Inc.
Interest
in and to investment in KMA Capital Partners Ltd - Nine (9) Limited
Partnership Units
|
·
|
A
BDC is an investment company and is engaged in the business of investing,
reinvesting, owning, holding, or trading in securities. We instead
intend
to carry on our marine recovery and explorations business through
subsidiaries and controlled
companies.
|
·
|
In
carrying on our business, from time to time we expect to enter into
joint
venture and other transactions with affiliates, subject to the oversight
and approval of the Board of Directors. BDCs generally are unable
to enter
into such transactions without the approval of the Securities and
Exchange
Commission (the "SEC"), and such approvals generally cannot be obtained
without undue time and expense.
|
·
|
BDCs
are subject to restrictions in the 1940 Act on the type and amount
of
securities, other than Common Stock, that they can issue. We believe
that
the Company would be better served by greater flexibility in our
capital
structure. The closely regulated nature of BDCs causes them to be
subject
to greater legal and accounting
expenses.
|
·
|
Because
of restrictions on the Company' ability to issue stock, we were unable
to
comply with the Settlement Agreement effective June 30, 2006, while
the
Company was a BDC. We believe that the comprehensive settlement embodied
in the Settlement Agreement is in the Company's best
interests.
|
·
|
We
will no longer be subject to the requirement in Section 61 of the1940
Act
that we maintain a ratio of assets to senior securities (such as
senior
debt or preferred stock) of at least 200%. We will no longer be prohibited
from protecting any director or officer against any liability to
the
Company or our shareholders arising from willful malfeasance, bad
faith,
gross negligence, or reckless disregard of the duties involved in
the
conduct of that person's office.
|
·
|
We
will no longer be required to provide and maintain a bond issued
by a
reputable fidelity insurance company to protect the Company against
larceny and embezzlement.
|
·
|
We
will no longer be required to ensure that a majority of our directors
are
persons who are not "interested persons," as that term is defined
in
section 56 of the Investment Company Act, and certain persons that
would
be prevented from serving on our board if we were a BDC (such as
investment bankers) would be able to serve on our
board.
|
·
|
We
will no longer be subject to provisions of the 1940 Act regulating
transactions between BDCs and certain
affiliates.
|
·
|
We
will no longer be subject to provisions of the 1940 Act restricting
our
ability to issue shares, warrants and
options.
|
·
|
We
will be able to change the nature of our business and fundamental
investment policies without having to obtain the approval of our
shareholders.
|
1.
|
We
have made every reasonable effort to apply the requirement, but are
unable
to do.
|
2.
|
Retrospective
application of the change in accounting principle requires assumptions
about prior management's intent in prior periods that cannot now
be
independently substantiated.
|
3.
|
Retrospective
application of the change in accounting principle requires significant
estimates of amounts, and at this time it is impossible to distinguish
objectively information about those estimates that: (a) provides
evidence
of circumstances that existed on the date(s) at which those amounts
would
be recognized, measured, or disclosed under retrospective application,
and
(b) would have been available when the financial statements for that
prior
period were issued.
|
Additional
paid in capital
|
$
|
(550,705
|
)
|
|
Deficit
|
(425,068
|
)
|
||
Unrealized
depreciation on investments
|
1,015,273
|
|||
|
||||
Net
adjustments
|
$
|
39,500
|
1.
|
Articles
of Incorporation are incorporated by reference to Exhibit 3(i) of
Form
10-K as filed electronically with the SEC on October 13,
2006.
|
2.
|
By-Laws
are incorporated by reference to Exhibit 3(ii) of Form 10-K as filed
electronically with the SEC on October 13,
2006.
|
3.
|
Exchange
Agreement is incorporated by reference to Exhibit 10.1 of Form 10-K
as
filed electronically with the SEC on October 13,
2006.
|
4.
|
Settlement
Agreement is incorporated by reference to Exhibit 10.2 of Form 10-K
as
filed electronically with the SEC on October 13,
2006.
|
5.
|
Section
302 CEO and CFO Certification is filed herewith as
EX-31
|
6.
|
Section
906 CEO and CFO Certification is filed herewith as
EX-32
|
SOVEREIGN EXPLORATION ASSOCIATES INTERNATONAL, INC. | ||
|
|
|
Date: February 13, 2007 | By: | /s/ Robert D. Baca |
Robert
D. Baca
Chief
Executive Officer, President, Chief Financial Officer and
Director
|