svxa_8k-111808.htm

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): November 18, 2008

SOVEREIGN EXPLORATION ASSOCIATES INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)
 
Utah
333-29903
 30-0123229
     
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer
Identification No.)

110 South State Street, Suite 200
Newtown, Pennsylvania 18940

(Address of principal executive offices and 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:
 
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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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 Report

On November 18, 2008, Chief Executive Officer and the Board of Directors concluded that the previously issued statements for the fiscal year ended June 30, 2007, should no longer be relied upon because the acquisition of Lavelle Holdings, Inc. on June 11, 2007 was not accounted for in accordance with SFAS no. 141. In addition, the previously issued audited financial statements included the full year of operating results as opposed to the operating results commencing on the date of acquisition of Lavelle Holdings, Inc., a wholly-owned subsidiary of the Company.

Pursuant to the requirements of SFAS no. 154, the Company is restating the financial statements at the earliest possible date, which is as of and for the fiscal year ended June 30, 2007.
 
The following table represents the fair value of the net assets acquired along with the corresponding calculation of goodwill:
 

Fair value of the net assets acquired
      
       
Cash
   $ 74,830  
Accounts receivable
     323,493  
Investment - Reds Caribbean
     51,962  
Accounts payable and accrued expenses
     (237,196 )
         
Total identifiable assets
     213,089  
         
Goodwill
     311,911  
         
Total cash consideration paid at closing
     525,000  
         
Total contingent consideration (1)
     -  
         
Total consideration as of the measurement date
   $ 525,000  
 
(1)  
the agreement requires contingent consideration, to be paid nineteen months after closing based on certain milestones being achieved.
 
 
 
 
 
 
 

 
 
 
 

 
CORRECTION OF ERRORS IN PREVIOUSLY ISSUED STATEMENTS

The Company determined that the following is the impact of the correction for the acquisition of Lavelle Holdings, Inc. on June 11, 2007:

restated consolidated balance sheet as of June 30, 2007:
    
 
   
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
                            
Goodwill
     311,901       -   A        311,901  
Licenses and permits, net of amortization
     1,480,946       1,480,946           -  
Investments, net of allowance of $173,868
     51,962       51,962           -  
Notes receivable, net of allowance of $832,849
     -       -           -  
Total other assets
     1,844,809       1,532,908           311,901  
                             
Total assets
   $ 4,943,458       4,631,557         $ 311,901  
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
     20,530,447       20,119,147           411,300  
Minority interest
     (803,530 )     (803,530 )         -  
Accumulated deficit
     (21,362,218 )     (21,262,818 ) B        (99,400 )
 Total deficiency in assets
     (1,605,459 )     (1,917,359 )         311,900  
                             
Total liabilities and deficiency in assets
   $ 4,943,457     $ 4,631,557         $ 311,900  
                             
 A - Entry to record goodwill for the acquisition of Lavelle Holdings, Inc. in June 2007
                            
                             
 B - To record the elimination of the net income in Lavelle Holdings, Inc for the fiscal year ended June 30, 2007
                            
                             
 C - To record the net effect of these two transactions (A & B) on the additional paid in capital as of June 30, 2007
                            
                             
 


 
 
 

 

restated consolidated balance sheet as of June 30, 2007:
                            
 
                       
   
2007
    
2007
            
   
As Corrected
          
Change
      
                       
Revenue
   $ -     $ 1,860,442     $ (1,860,442 ) A  
Cost of sales
     -       1,474,632       (1,474,632 )    
Gross profit
     -       385,810       (385,810 )    
Operating expenses
                            
Salaries and wages
     446,403       562,547       (116,144 ) A  
General and administrative
     435,282       585,304       (150,020 ) A  
Legal and professional fees
     298,251       318,497       (20,246 ) A  
Total operating expenses
     1,179,936       1,466,348       (286,410 ) A  
Loss from operations
     (1,179,936 )     (1,080,538 )     (99,400 ) A  
Other income (expenses)
                            
Depreciation and amortization
     (226,970 )     (226,970 )     -      
Interest income
     1,351       1,351       -      
Interest expense
     (144,532 )     (144,532 )     -      
Total other (income) expenses
     (370,151 )     (370,151 )     -      
Operating loss before income taxes
     (1,550,087 )     (1,450,689 )     (99,400 ) A  
Provision for income taxes
     -       -       -      
Net loss
   $ (1,550,087 )   $ (1,450,689 )   $ (99,400 ) A  
                             
Net loss per common share
                            
Basic
   $ (0.06 )   $ (0.05 )   $ (0.01 ) B  
                             
Weighted average of common shares outstanding - Basic
     27,580,209       27,580,209       27,580,209      
                             
                             
A - Entry to eliminate the operating activity for Lavelle Holdings, Inc. for the fiscal year
ended June 30, 2007, which had a net effect of elimination net income of $99,400.
                             
B - The net effect of the elimination of Lavelle Holdings, Inc. net income of $99,400 for
the fiscal year ended June 30, 2007 had a net effect on the net loss per common share of ($0.01)

 
 
 


SIGNATURES

Pursuant to the Securities Act of 1934, the Company has duly caused this report to be signed on its behalf.
 
 
SOVEREIGN EXPLORATION ASSOCIATES  INTERNATIONAL, INC.
  
       
 November 19, 2008
By:
/s/ Robert D. Baca                  
  
   
Robert D. Baca, Chief Executive Officer