Decentral Life (WDLF) 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarter ended May 31, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission File Number:

SEW CAL LOGO, INC.

(Exact name of Registrant as specified in charter)

Nevada	46-0495298
(State or other jurisdiction of	(I.R.S. Employer I.D. No.)
incorporation or organization)

207 W. 138th Street, Los Angeles, California 90061

(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (310) 352-3300

Check whether the Issuer (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

State the number of shares outstanding of each of the Issuer's classes of common equity as of the latest practicable date: At May 31, 2007, there were27,080,702 shares of the registrant's Common Stock outstanding and 300,000 shares of Series A Preferred Stock outstanding.

PART I

ITEM 1. FINANCIAL STATEMENTS

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's most recent registration statement on Form SB-2 as amended.

MOORE & ASSOCIATES, CHARTERED

ACCOUNTANTS AND ADVISORS

PCAOB REGISTERED

Report of Independent Registered Public Accounting Firm

Sew Cal Logo, Inc.

207 W. 138^th St

Las Angeles, CA 90061-1003

We have reviewed the accompanying balance sheet of Sew Cal Logo Inc. as of May 31, 2007, and the related statements of income, retained earnings, and cash flows for the nine months then ended, in accordance with the standards of the Public Company Accounting Oversight Board (United States). All information included in these financial statements is the representation of the management of Sew Cal Logo Inc.

A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles.

/s/ Moore & Associates, Chartered

Moore & Associates, Chartered

Las Vegas, Nevada

July 17, 2007

2675 S. JONES BLVD. SUITE 109, LAS VEGAS, NEVADA 89146 (702) 253-7511 Fax:

(702)253-7501

SEW CAL LOGO, INC.
BALANCE SHEETS
				August 31,
	May 31,			2006
	2007			(Restated)
ASSETS
Current Assets
Cash and cash equivalents	$	250,205		$	988,251
Accounts Receivable, net		155,705			261,515
Inventory		115,454			124,049
Prepaid Expenses		9,800			4,219
Total current assets		531,164			1,378,034
Equipment and machinery, net		236,120			290,058
Other assets		-			-
Total assets	$	767,284		$	1,668,092
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	15,233		$	39,226
Note Payable-shareholder		347,884			347,884
Other current liabilities		164,686			115,463
Current Poriton of Long Term Debt		244,583			285,764
Total current liabilities		772,386			788,337
Long-term liabilities
Note Payable-related party		51,079			77,298
Convertible Debentures		2,290,833			2,421,969
Discount on Convertible Debentures		(955,271	)		(1,880,384	)
Equipment Loans		11,851			28,070
Total liabilities		2,170,878			1,435,290
Stockholders' Equity (Deficit)
Preferred stock, authorized 300,000 shares,
Par value $0.001, issued and outstanding at
5/31/07 and 8/31/06 is 300,000 and 234,800
shares respectively.		300			235
Common stock, authorized 500,000,000 shares,
$0.001 par value, issued and outstanding at
5/31/07 and 8/31/06 is 27,080,702 and 5,549,502
shares respectively.		27,081			5,549
Additional Paid in Capital		4,067,597			3,812,665
Stock Subscribed		-			36,000
Accumulated Deficit		(5,498,572	)		(3,621,647	)
Total stockholders' equity (deficit)		(1,403,594	)		232,802
Total liabilities and stockholders' equity	$	767,284		$	1,668,092

The accompanying notes are an integral part of these financial statements.

SEW CAL LOGO, INC.
STATEMENTS OF OPERATIONS
	Nine Months Ended						Three Months Ended
	May 31,						May 31,
	2007			2006			2007			2006
				(Restated)						(Restated)
Revenue:
Sales of Caps, Embroidery and Other	$	1,482,731		$	1,652,595		$	477,263		$	516,040
Total Revenue		1,482,731			1,652,595			477,263			516,040
Cost of Goods Sold		1,413,501			1,644,794			497,961			584,490
Gross profit		69,230			7,801			(20,698	)		(68,450	)
Expenses:
General and Administrative		310,938			240,911			147,260			136,446
Officer and Administrative Compensation		284,535			304,947			83,269			226,462
Consulting, Legal and Accounting		160,754			104,562			53,285			47,349
Depreciation		60,638			44,311			18,854			20,357
Rent		152,000			33,000			12,000			-
Total expenses		968,865			727,731			314,668			430,614
Loss from Operations		(899,635	)		(719,930	)		(335,366	)		(499,064	)
Other Income (Expenses)
Other Income (Expense)		28,524			608			20,092			608
Warrant (Expense)		-			(585,343	)		-			(58,343	)
Interest (Expense)		(1,005,814	)		(807,501	)		(330,563	)		(714,996	)
Total other expenses		(977,290	)		(1,392,236	)		(310,471	)		(772,731	)
Loss before income taxes		(1,876,925	)		(2,112,166	)		(645,837	)		(1,271,795	)
Provision for income taxes		-			-			-			-
Net loss	$	(1,876,925	)	$	(2,112,166	)	$	(645,837	)	$	(1,271,795	)
Basic and Diluted Earnings (Loss) per Share	$	(0.12	)	$	(0.40	)	$	(0.04	)	$	(0.24	)
Weighted Average Number of Common Shares		15,248,849			5,225,836			15,248,849			5,225,836

The accompanying notes are an integral part of these financial statements.

SEW CAL LOGO, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(Restated)
(From August 30, 1985 (Inception) to May 31, 2007)
									Additional								Total
	Preferred Stock				Common Stock				Paid in		Stock			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Subscribed			(Deficit)			Equity
Balance, August 31, 2004		234,800	$	235		5,020,000	$	5,020	$	61,290	$	-		$	(568,448	)	$	(501,903	)
Equipment Purchase						33,334		33		114,067								114,100
Shares issued for Services
at $0.10 per share						122,834		123		12,160								12,283
Stock Subscribed												36,000						36,000
Net Loss for Year															(105,366	)		(105,366	)
Balance, August 31, 2005		234,800		235		5,176,168		5,176		187,517		36,000			(673,814	)		(444,886	)
Shares issued for Services
at $0.15 per share						50,000		50		7,450								7,500
Fair Value of Warrants attached to
Convertible Debentures										1,081,657								1,081,657
Beneficial Conversion Feature attached to
Convertible Debentures										2,500,000								2,500,000
Shares issued for Services
at $0.10 per share						33,334		33		3,300								3,333
Shares issued for Conversion of Debt						290,000		290		32,741								33,031
Net Loss for Year															(2,947,833	)		(2,947,833	)
Balance, August 31, 2006		234,800		235		5,549,502		5,549		3,812,665		36,000			(3,621,647	)		232,802
Preferred Shares issued for Services		65,200		65						1,891								1,956
Common Stock Issued for Cash						61,000		61		60,939		(36,000	)					25,000
Shares issued for Services						2,829,680		2,830		79,231								82,061
Shares issued for Conversion of Debt						18,640,520		18,641		112,871								131,512
Net Income (Loss) for period															(1,876,925	)		(1,876,925	)
Balance, May 31, 2007		300,000	$	300		27,080,702	$	27,081	$	4,067,597	$	-		$	(5,498,572	)	$	(1,403,594	)

The accompanying notes are an integral part of these financial statements.

SEW CAL LOGO, INC.
STATEMENTS OF CASH FLOWS
	Nine Months Ended
	May 31,
	2007			2006
				(Restated)
Operating Activities:
Net income (loss)	$	(1,876,925	)	$	(2,112,166	)
Depreciation		60,638			61,072
Stock issued for services		84,017			10,833
Stock issued for conversion of debt		131,512			33,031
Warrants issued for convertible debt		-			585,343
Amortization of Discount on Debentures		925,113			516,020
Adjustments to reconcile net income (loss)
(Increase) decrease in prepaid expenses		(5,581	)		(7,402	)
(Increase) decrease in inventory		8,595			43,953
(Increase) decrease in other assets		-			6,000
(Increase) decrease in accounts receivable		105,810			(30,367	)
Increase (decrease) in accounts payable		(23,993	)		(23,263	)
Increase (decrease) in other current liabilities		49,223			(312,736	)
Net cash provided by (used in) operating activities		(541,591	)		(1,229,682	)
Investing Activities:
(Purchases) disposal of equipment		(6,700	)		-
Cash (used) in investing activities		(6,700	)		-
Financing Activities:
Proceeds from Notes Payable		-			-
Proceeds from Debentures Payable		-			2,000,000
Stock Subscription		(36,000	)		-
Stock Sales		61,000			-
Increase/(Decrease) in shareholder loan		-			-
Repayment of SBA Loan		-			-
Repayment of loans		(214,755	)		(93,012	)
Proceeds from equipment loan		-			-
Net cash provided by (used in) financing activities		(189,755	)		1,906,988
Net increase (decrease) in cash and cash equivalents		(738,046	)		677,306
Cash and cash equivalents at beginning of the period		988,251			56,865
Cash and cash equivalents at end of the period	$	250,205		$	734,171
Supplemental Information:
Interest	$	1,005,814		$	807,501
Taxes	$	-		$	-
Non Cash Financing Activities:
Common stock issued for converted debt	$	131,512		$	33,031

The accompanying notes are an integral part of these financial statements.

NOTE 1. Summary of Significant Accounting Policies

The Company

C J Industries was incorporated in the State of California on August 30, 1985 and changed its name to Southern California Logo, Inc (the Company). The Company transacts business as Sew Cal Logo.

On February 24, 2004 the Company merged with Calvert Corporation, a Nevada Corporation. This was a recapitalization accounted for as a stock exchange transaction (reverse merger). Calvert also changed its name to Sew Cal Logo, Inc. See Note 8 for more details of this merger.

The Company is located in Los Angeles, California. The Company produces and manufactures custom embroidered caps, sportswear and related corporate identification apparel. The Company provides an in-house, full-service custom design center where original artwork and logo reproduction for embroidery are available. The Company also offers contract embroidery and silk-screening to the manufacturing and promotional industry. The Company’s products are sold, primarily in the United States, to Fortune 500 companies, major motion picture and television studios, retailers, and local schools and small businesses.

Use of Estimates

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates, and assumptions that affect the reported amounts of assets and liabilities (including disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable

The Company’s trade accounts receivable and allowance for doubtful accounts are shown below.

	5/31/07			8/31/06
Gross Trade Accounts Receivable	$	157,278		$	262,765
Allowance for Doubtful Accounts		(1,573	)		(1,250	)
Accounts Receivable, net	$	155,705		$	261,515

Revenue Recognition

The Company recognizes revenue from product sales upon shipment, which is the point in time when risk of loss is transferred to the customer, net of estimated returns and allowances.

Cash and Cash equivalents

The Company maintains cash deposits in banks and in financial institutions located in southern California. Deposits in banks are insured up to $100,000 by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash deposits.

Inventory

Inventory is stated at the lower of cost (first-in, first-out method) or market and consists of raw material, work-in-process and finished goods. Normally the Company ships out to the customer the finished goods as soon as they are produced and therefore usually does not maintain a finished goods inventory. Overhead items are applied on a standard cost basis to work in process and finished goods.

	5/31/07		8/31/06
Raw Materials and WIP	$	115,454	$	124,049
Finished Goods		-		-
Total Inventory	$	115,454	$	124,049

Equipment and Machinery

Equipment and machinery are stated at cost. Depreciation is computed using the straight-line method over their estimated useful lives ranging from five to seven years. Depreciation and amortization expense for the period ended May 31, 2007 and the fiscal year August 31, 2006 amounted to $60,638, and $81,430 respectively. Gains from losses on sales and disposals are included in the statements of operations. Maintenance and repairs are charged to expense as incurred. As of May 31, 2006 and August 31, 2005 equipment and machinery consisted of the following:

	5/31/07		8/31/06
Equipment and Machinery	$	942,890	$	968,644
Less:
Accumulated depreciation		706,770		678,586
	$	236,120	$	290,058

Fiscal Year

The Company operates on a fiscal year basis with a year ending August 31.

Earnings and Loss Per Share Information

Basic net earnings (loss) per common share is computed by dividing net earnings (loss) applicable to common shareholders by the weighted-average number of common shares outstanding during the period.

Segment Reporting

Pursuant to Statement of Financial Accounting Standards No. 131 (“SFAS No. 131”), “Disclosure about Segments of an Enterprise and Related Information,” the Company has determined it operated in only one segment.

NOTE 2. Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, the Company has accumulated a loss during the last five years of operations. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.

Managements Plan

Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan. It is in the process of expanding its sales and distribution capability.

NOTE 3. Accounts Payable and Other Current Liabilities

As of the period ends shown, accounts payable and accrued liabilities consisted of the following:

	5/31/07		8/31/06
Trade accounts payable	$	16,161	$	39,226
Sales tax payable	$	3,483	$	4,896
Short Term Loan - Related Party
Payroll Liabilities		68,252		71,177
Credit Card Debt		903		15,299
Revolving bank line of credit (Prime +
3.8 %, interest payable monthly), Principal
due upon maturity on 7/1/07 unless renewed
by bank, secured by accounts receivable		92,048		24,091
Revolving bank line of credit (prime +
3.8750 % Interest payable monthly), Principal
due upon maturity on 7/1/06 unless renewed
by bank, secured by accounts receivable		-		-
	$	164,686	$	115,462

NOTE 4. Note Payable- Related Party

On March 1, 2003, for purposes of working capital, the sole shareholder and spouse made a $355,384 subordinated loan to the Company. The Company is obligated to pay monthly interest only on the subordinated loan during its term at the rate of 10% per annum (fixed-rate calculated as simple interest). The entire principal amount of the loan was originally due on March 1, 2004, and has continued from that time on a month-to-month basis. The subordinated loan, which was consented to by United Commercial Bank and subsequent banks, is collateralized by the assets of the Company, including but not limited to any and all equipment owned by the Company, inventory, and outstanding receivables. The balance due at May 31, 2007 is $347,884.

On April 1, 2005 a shareholder loaned the company $100,000 on a five year monthly installment loan at 5% per annum for the purchase equipment. Balance of loan as of May 31, 2007 is $51,079.

NOTE 5. Commitments and Contingencies

Long-Term Debt

On March 25, 2002 the Company entered into an agreement with United Commercial Bank for a $515,000 SBA loan. For the years ending August 31, 2003 and 2002, the unpaid principal balance of the loan was $462,100 and $500,313 respectively. The monthly required payment varied with an annual interest rate of 6.75% and a maturity date of March 1, 2012. This loan related to the purchase of equipment.

On August 11, 2004 the Company refinanced this SBA loan with Pacific Liberty Bank. As of May 31, 2007 the balance was $244,583. Monthly payments are made the 15^th of each month with interest at prime plus 2.5. Currently the interest rate is 9.5%. This loan is collateralized by the assets of the corporation and is in first place before the shareholder loan.

On April 16, 2003 the Company entered an installment sale contract with GMAC for the purchase of a vehicle. The total amount financed at signing was $40,754 that represents the total sale price. The agreement requires 60 monthly payments of approximately $679 beginning on May 16, 2003 and ending on April 16, 2008. This Loan has been paid off.

The Company has a second installment loan with GMAC on a vehicle with a balance as of August 31, 2006 of $11,851

Lease Commitments

The Company leases warehouse and office facilities under an operating lease requiring the Company to pay property taxes and utilities. In July 2004 this building was purchased by a related party (a corporation controlled by the officers) and the lease was re-written for 5 years. Lease expense is currently $12,500 per month.

The lease obligation is shown below for the next five years.

	Year 1		Year 2		Year 3		Year 4		Year 5
Office /warehouse lease	$	150,000	$	150,000	$	150,000	$	150,000	$	150,000

Callable Convertible Debentures

On February 16, 2006 the Company executed an equity financing agreement wherein it will issue an aggregate of $2,000,000 callable convertible debentures in three segments. The Company has received a net of $1,955,000. The debentures are convertible to common stock at 45% below the lowest three intra-day trading price during the 20 trading days immediately preceding conversion.

The Debentures also carry five-year warrants exercisable at $0.50 per share. The aggregate number of warrants to be issued is 2,142,855. The Company has recorded an expense of $585,343 for the fair value of the warrants. The value was determined using the Black-Scholes pricing model and assumes a 5 year maturity, a risk free interest rate of 4.85% and a volatility of 207%.

The Company has recorded a discount on the convertible debentures of $2,000,000 which represents the beneficial conversion feature. During the year ended August 31, 2006 the Company has converted $33,031 debt into stock and expensed $565,752 of the recorded discount as interest expense. The Company will amortize the remaining discount over the 2 year life of the debentures. The discount was determined using the Black-Scholes pricing model and assumes a 2 year maturity, a risk free interest rate of 4.85% and a volatility of 207%.

On July 31, 2006 the Company executed an equity financing agreement wherein it has issued $500,000 in callable convertible debentures and 20,000,000 seven year warrants exercisable at $0.05 per share. The debentures are convertible to common stock at 40% below the lowest three intra-day trading price during the 20 trading days immediately preceding conversion. The aggregate number of shares to possibly be issued at 100% conversion is 69,444,444 shares. Calculated using a current 3 day trading average price per share of $0.012 per share less 40% is $0.0072 per share divided into $500,000 equals 69,444,444 shares.

During the year ended August 31, 2006, the Company recorded an expense of $496,314 for the fair value of the warrants. The value was determined using the Black-Scholes pricing model and assumes a 5 year maturity, a risk free interest rate of 4.85% and a volatility of 207%.

The Company has recorded a discount on the convertible debentures of $500,000 which represents the beneficial conversion feature and is amortized to interest expense over the 2 year life of the debentures. The Company recorded an expense of $20,833 during the year ended August 31, 2006. The discount was determined using the Black-Scholes pricing model and assumes a 2 year maturity, a risk free interest rate of 4.85% and a volatility of 207%.

NOTE 6. Stockholders’ Equity

Preferred Stock

The Company (post merger) is authorized to issue three hundred thousand (300,000) shares of series A preferred stock at a par value of $0.001. The preferred stock is convertible to common stock at one share of preferred for every 100 shares of common. The preferred shares can only be converted when the Company reaches $10,000,000 in sales for any fiscal year. As of August 31, 2004 there were 234,800 shares of preferred stock. The value was placed at par. The conversion to common stock would be 23,480,000 shares. Based upon the actual growth for the last two years, the $10,000,000 in sales will not be reached within five years. Therefore, these shares are not considered in calculating the loss per share.

During the quarter ended May 31, 2007 the Company issued 65,200 preferred shares for services to key employees for services.

Common Stock

On August 25, 2006 the Company’s authorization to issued common stock was increased from 50,000,000 shares to 500,000,000 shares at par value of $0.001

As of August 31, 2004 (post merger) the Company had 5,020,000 common shares issued and outstanding. The Company’s financial statements have been restated to reflect the recapitalization on a retroactive basis.

In May 2005 the Company purchased equipment valued at $114,100 for 33,334 common share and issued 122,834 common shares for services valued at $12,283.

As of 31 May 2005 the Company had received from investors $36,000 in investment funds for which restricted common shares will be issued. The exact number of shares has not yet been determined.

On January 6, 2006 the Company issued 50,000 common shares for services valued at $7,500.

On February 16, 2006 the Company entered into a securities purchase agreement for a total subscription amount of $2,000,000 that includes stock purchase warrants and callable convertible debentures. A discount on convertible debentures was recorded as additional paid in capital of $2,000,000 for the beneficial conversion feature which is being amortized over the life of the debentures. The total subscription includes an aggregate of 2,142,858 five-year warrants exercisable for the same number of common shares at $0.50 per share. An aggregate of 25,974,026 common shares have been registered and are available for issue to potentially convert the full $2,000,000.

On July 31, 2006 the Company issued $500,000 in convertible debentures which are convertible to shares of the Company’s common stock at a 40% discount to the market price at the time of conversion. A discount on convertible debentures was recorded as additional paid in capital of $500,000 for the beneficial conversion feature which is being amortized over the life of the debentures. Common stock registered to convert the full $500,000 was calculated at 69,444,444 shares using the current three day average price per share of $0.012 less a 40% discount.

On May 31, 2006 the Company issued 290,000 common shares by converting $33,031 of debenture debt and issued 33,334 common shares for consulting services valued at $3,333.

The Company issued 61,000 common shares for cash of $25,000 and the subscription deposit of $36,000 received in May 2005 in a private placement.

The Company issued 2,829,680 common shares for services valued at $82,061.

The Company converted $131,512 debt into 18,640,520 common shares during the period ended May 31, 2007.

Warrants

With the $1,955,000 worth of convertible debentures described above 2,000,000 five-year warrants for commons stock exercisable at $0.50 per share were issued and with the $500,000 convertible debentures 20,000,000 seven-year warrants for common shares exercisable at $0.05 per share were issued. Both exercisable prices are “out of the money” therefore no discount has been recorded.

NOTE 7. Interest Expense

Interest expense for the period ended May 31, 2007 and the year ended August 31, 2006 is $1,005,814 and $716,440 respectively.

NOTE 8. Income Taxes

The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.

SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is calculated by multiplying a 15% estimated tax rate by the items making up the deferred tax account. For the Company only the Net Operating Loss (NOL) was available for a tax asset.

The provision for income taxes is comprised of the net changes in deferred taxes less the valuation account plus the current taxes payable.

At August 31, 2006, federal income tax net operating loss carry forwards (“NOL’s”) which were available to the Company were the following with the year in which they expire.

Year (8/31)	Amount		Expires
1996	$	2,104		2011
1997		9,265		2012
1998		26,317		2013
1999		21,074		2019
2000		50,619		2020
2001		21,675		2020
2002		319,424		2022
2003		45,381		2023
2005		105,366		2025
2006		2,947,833		2026
Total	$	3,549,058

Were the NOL tax asset to be recorded at 8/31/05 it would be a long-term asset of $532,359. Continued profitability by the Company will be a major factor in the valuation account being removed and the recording of this asset.

NOTE 9. Merger with Calvert

On February 24, 2004 the Company merged with Calvert Corporation, an inactive Nevada Corporation. This was a recapitalization accounted for as a stock exchange reverse acquisition with Calvert being the surviving legal entity and Southern California becoming the surviving historical entity. Before the merger Southern California had 100 shares of common stock issued and outstanding that were owned by a single shareholder. As part of the merger Calvert issued to this shareholder 189,800 shares of series A preferred stock and 3,000,000 shares of common stock in exchange for all the shares (100) of Southern California. These share totals have been retroactively applied to previous years.

As part of the merger 45,000 shares of preferred stock and 1,500,000 shares of common stock were issued for services rendered. A value of $1,545 was placed upon these shares.

Calvert had a zero book value prior to the merger and is shown as the acquired company on the statement of stockholders’ equity with 520,000 shares outstanding prior to the merger.

After the completion of the merger the Company had 5,020,000 shares of common stock and 234,800 shares of series A preferred stock.

NOTE 10. The Effect Of Recently Issued Accounting Standards

Below is a listing of the most recent accounting standards SFAS 150-154 and their effect on the Company.

Statement No. 150Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (Issued 5/03)

This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.

Statement No. 151Inventory Costs-an amendment of ARB No. 43, Chapter 4 (Issued 11/04)

This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “…under some circumstances, items such as idle facility expense, excessive spoilage, double freight and re-handling costs may be so abnormal ass to require treatment as current period charges….” This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.

Statement No. 152Accounting for Real Estate Time-Sharing Transactions (an amendment of FASB Statements No. 66 and 67)

This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions.

This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, states that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2.

Statement No. 153Exchanges of Non-monetary Assets (an amendment of APB Opinion No. 29)

The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, includes certain exceptions to the principle. This Statement amends Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assts and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.

Statement No. 154 - Accounting Changes and Error Corrections (a replacement of APB Opinion No. 20 and FASB Statement No. 3)

This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.

The adoption of these new Statements is not expected to have a material effect on the Company’s current financial position, results or operations, or cash flows.

NOTE 11. Restated Financial Statements

The Company’s financial statements for the year ended August 31, 2006 have been restated to reflect the beneficial conversion feature and the warrants attached to the convertible debt issued during 2006. As summary of the effect of the restatements is as follows:

Balance Sheet:

Discount on Convertible Debentures
Original	$	485,014
As Restated		1,880,384
Additional Paid in Capital
Original	$	746,008
As Restated		3,812,665
Accumulated Deficit
Original	$	1,950,360
As Restated		3,621,647
Statement of Operations:
Warrant Expense
Original	$	-
As Restated		1,081,657
Interest Expense
Original	$	126,810
As restated		716,440

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONTINUING AND FUTURE PLAN OF OPERATIONS.

FORWARD LOOKING STATEMENTS

This analysis should be read in conjunction with the condensed consolidated financial statements, the notes thereto, and the financial statements and notes thereto included in the Company's Registration Statement on Form SB-2, as amended, initially filed on March 20, 2004. All non-historical information contained in this annual report is a forward-looking statement. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause the actual results to differ materially from those reflected in the forward-looking statements.

Results of Operations

Total revenue was $477,263 for the quarter ended May 31, 2007 as compared to $516,040 the quarter ended May 31, 2006, a net decrease of $38,777. The net decrease is primarily due to loss of private label business as the market for headwear manufacturing continued moving to Chinese imports. Also, The decrease in gross profit as a percent of sales is directly attributed to our significant investment in starting our new brand Pipeline Posse. A line of clothing has been developed and advertising and promotional campaigns are initiated and underway. This new segment of our business is expected to provide a significant increase in revenues resulting within the next 18 months. We have increased our rent by $7500 per month as a result of leasing an additional 10,000 square feet within our occupied facility as it became available when the former tenant moved out. This additional space, several offices and an inventory / shipping area, are devoted exclusively to our new brand and product development initiated to provide company growth in these new areas. Officer and Administrative Compensation was $83,269 for the quarter ended May31, 2007 as compared to $226,462 for the quarter ended May31, 2006, a net decrease of $143,193. The net decrease is due to the fact that the President took a decrease in salary. Total Assets were $767,284at May31, 2007 as compared to $1,668,092 at May 31, 2006, a net decrease of $900,808. The net decrease was primarily due increased investment, legal expenses, and advertising in development of our trademarks and branding of our own apparel line.

Plan of Operation

In 2005 we acquired the rights to a branded line of Surf and Sports Wear items named Pipeline Posse. We have developed the necessary relationships, executed exclusive marketing and advertising programs with some of the top names in the Surfing World, designed an initial line of related surf and sports clothing, created and activated an on-line retail store for Pipeline Posse, and are planning a Summer - Fall 2007 launch of these products into selected retail stores.

We are currently in the process of developing our comprehensive business plan to include branded equipment, film and television projects, sports equipment and accessories, as well as brand endorsement for several major categories of products related to the action sports and youth markets.

Private Labeling

Domestic headwear suppliers have been drastically reduced as a result of increased lower pieced imports. Suppliers remaining in this business each have their own niche in the market place. Few remain in California and our customer base is increasing somewhat with this reduced competition. There are U.S. suppliers located in the Midwest and on the East Coast. They seldom manufacture for our market and deal mainly in the golf, major league baseball and ad specialty-type businesses.

Overseas suppliers are a different situation. They can produce a cap at a fraction of the price we can and we are constantly in competition with them. They can copy all that we create, but if they are asked to create on their own, they may fall short, as our industry is constantly changing by way of fabrics, styles, and method of decorating. Overseas suppliers are in the business of mass production for export. Our current customers use overseas suppliers for some of their "bread and butter" styles but tend to use U.S. suppliers for the more cutting edge products. However, overseas manufacturers require considerably more time in creating new products because of their inability to provide face-to-face contact with designers and domestic customers. They also require greater lead times for shipping and cannot make changes overnight (literally) when required. The logistics also may not allow them to be immediately aware of developing trends, forecasting them, and then developing an appropriate finished product instantly.

At present, the youth oriented "action sports" lifestyle-clothing market (surf/skate/snow) is led by labels such as "Quiksilver" of Huntington Beach, California, representing in excess of $1 billion in annual sales. Also, "O'Neill Sportswear", "Rip Curl", "Lost", "Billabong", "Volcom", and numerous other Orange County, California-based clothing companies service this market and can be considered competition for our new brands. We believe that teens and young adults are looking for something new and trendy to identify with, purchase, and wear.

Although we believe we now have the experience and resources to take advantage of and fulfill the needs of this market and we have already made significant steps towards doing so, the youth, active and sports apparel industry is highly competitive, with many of our competitors having greater name recognition and resources than we do. Many of our competitors are well established, have longer-standing relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources. As a result, these competitors may be able to respond more quickly and effectively than we can to new or changing opportunities or customer requirements. Existing or future competitors may develop or offer products that provide price, service, number or other advantages over those we intend to offer. If we fail to compete successfully against current or future competitors with respect to these or other factors, our business, financial condition, and results of operations may be materially and adversely affected.

We currently have no market share data available for competition in these areas. We work on each job through personal contacts and are frequently the only company contacted for the particular project.

We do not depend on any one or a few major customers.

Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts

We recently applied to the USTPO for the trademark “Pipeline Posse” in several categories. Each of our applications is active and currently under review for approval by the USPTO examiners We will continue to assess the need for any copyright, trademark or patent applications on an ongoing basis.

Film Wardrobe & Entertainment Related Business

Film wardrobe and related business remains slow as productions continue to be produced outside the United States. This holds true for nearly all of the major studios as well as independent filmmakers, causing the majority of the local costume houses to downsize.

To counter this trend and help regain our lost dollar volume in this area we will continue our existing strategy of marketing directly to movie and television productions before they begin filming locally and send units out of town on location. Our strategy of dealing directly with producers, wardrobe personnel, and talent is beginning to pay off with recent orders from major films such as “Superman Returns” and the upcoming “American Gangster” starring Denzel Washington and Russell Crowe.

Corporate Sales

While corporate clients currently account for less than fifteen percent (15%) of our business, we continue to focus on growing this area of our business over the next year with the addition of in-house salespeople. Also, the addition of new silk screening equipment has given us the capability to accept and produce large orders of promotional t-shirts and related items for corporate programs through outside sales and advertising organizations. Our salespeople are now attempting to solicit business to our existing client base via telephone and Internet as well as to potential new customers through the same means as well as through print advertising via mailing and placement in trade publications. We are committed to making this new division profitable and more qualified labor has been retained to operate the new equipment as needed. Second and third manufacturing shifts can be added as growth requires. We have assigned two in-house clerical persons to service new inquiries and added accounts, as well as order finished goods for embellishment and shipping. Current production capacity is adequate to handle the anticipated increased volume. No other major capital expenditures are anticipated at this time.

Development of new Product Lines

We have identified and developed an opportunity to export the California life style to the rest of America and to the worldwide markets in general. Started as an idea born in San Clemente, California, home of the premier surfing beaches in the world, we have created a number of California Driven brands of products.

Under the California Driven umbrella, several lines are being developed with specific target markets in mind. Currently, several California Driven products are being developed by us but they do not represent any significant amount of our current overall revenue. The California Driven brand lines are being developed as an expansion into our own line of products to market and sell. To develop this market, capital of $2,500,000 in the form a convertible debenture has been secured and is being budgeted to support both current operations and develop our brands of apparel and related projects.

The first identified brand line is Pipeline Posse(TM). Three trademarks have been applied for and are under active review for approval by the USPTO. We have completed initial design of a line of surf wear under the Pipeline Posse(TM) logo and have manufactured lifestyle oriented goods to begin a sales and marketing campaign. The exclusive rights for Pipeline Posse(TM) were acquired on August 15, 2005 from Braden Dias of Hawaii. Mr. Dias is a world renowned surfer and is under agreement with us to represent Pipeline Posse as a professional athlete in the development of Surf and Sportswear lines. In addition to Mr. Dias, several additional professional Hawaiian surfers are currently under agreement to represent the project and 3 support people have been hired, both in Hawaii and California. Clothing design is being aggressively developed by both in-house personnel and professional independent contractors experienced in product development for the Action Sports Industry.

Contact with our target market has been initially established in several major surf publications through personal interviews with our athletes as well as editorials on The Pipeline Posse itself. Print and on-line advertising campaigns have commenced in both industry related magazines and websites. We have also published and activated PIPELINEPOSSE.COM, our website which features up to date information on the athletes, activities, photo and video galleries, an active news blog, related action sports links, and a fully developed online store. The secure site and shopping capability has been recently activated to accept credit cards and offer shipment of merchandise worldwide. A multi- faceted major advertising and marketing campaign is being budgeted and developed for launch in early 2007 and professional sales organizations are being interviewed and considered for representation and distribution of the brand both domestically and worldwide.

Additional Action Sport related brands are being considered and are in various stages of development in regard to trademarks, competition, market potential, and strategy and cost. Target dates for launch have not been yet established.

This Form 10-QSB includes forward looking statements concerning the future operations of the Company. This statement is for the express purpose of availing the Company of the protections of such safe harbor with respect to all forward looking statements contained in this Form 10-QSB. We have used forward looking statements to discuss future plans and strategies of the Company. Management's ability to predict results or the effect of future plans is inherently uncertain. Factors that could affect results include, without limitation, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions, acceptance, technological change, changes in industry practices and one-time events. These factors should be considered when evaluating the forward looking statements and undue reliance should not be placed on such statements. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein.

Critical Accounting Policies

SewCal's financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact its financial condition and results of operations, SewCal's views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on SewCal's consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report. During the next twelve months, we expect to take the following steps in connection with the further development of our business and the implementation of our plan of operations:

Item 3. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Securities and Exchange Commission (“SEC”) Rule 13a-15(e) and 15d-15(e) as of the end of the period covered by this report.  Based upon that evaluation, management  has concluded that our  disclosure  controls  and  procedures  are  effective  to ensure  that information  we are required to disclose in reports that we file or submit under the Securities Exchange Act is communicated to management, including the CEO and CFO, as appropriate to allow timely decisions  regarding required disclosure and is  recorded,  processed,  summarized  and  reported  within the time periods specified in the SEC’s rules and forms.

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over

financial reporting that occurred during the third quarter of 2006/2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

GRAPHIC PRINTS, INC. v. SEW CAL LOGO, INC. United States District Court for the Central District of California CASE NO.: CV06-6427 JFW (PJWx)

In October Plaintiff Graphic Prints Inc. filed suit asserting infringement and related causes of action with respect to its alleged trademarks. Sew Cal denies that any such activities have taken place, disputes the validity of plaintiff’s purported trademarks and will vigorously defend the suit.

Naranjo v. Sew Cal Logo Inc., CaliforniaCase No. BC368353

In March Mr. Naranjo filed a purported class action suit against Sew Cal asserting wages due and violations of various sections of the California Labor Code relating to his purported tenure with the company.  Sew Cal denies all allegations in the complaint and intends to defend the suit accordingly.

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act

31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of

the Sarbanes-Oxley Act

32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of

the Sarbanes-Oxley Act

32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of

the Sarbanes-Oxley Act

(b) REPORTS ON FORM 8-K

None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 16, 2007	By:  /s/ Richard Songer                     Richard Songer President, Director and Chie Executive Officer
	By: /s/ Judy Songer
	Judy Songer Director and Chief Financial Officer