UNITED
STATES SECURITIES AND EXCHANGE COMMISSIONWashington, DC 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 quarterly period ended December 31, 2007 OR  [
 ] 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: 333-229903 SOVEREIGN EXPLORATION ASSOCIATES INTERNATIONAL,
INC. (Exact
Name of Registrant as Specified in Its Charter)  Utah
30-0123229(State or other jurisdiction of incorporation )
(IRS Employer Identification No.)  503
Washington Avenue, Suite 2d, Newtown, Pennsylvania 18940 (Address
and Zip Code of Principal Executive Offices)  Registrant's Telephone Number: (781) 216-7512  (Former Name, Former
Address and Former Fiscal Year, If Changed Since Last Report) N/A   Check whether the
registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange act of 1934 during the preceding 12 months (or 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.
        [X] Yes [ ] No  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [
] Yes [X] No  As of February 08,
2008 there are 34,357,016 shares of the registrants common stock, $0.001 par
value, issued and outstanding.  Transitional
Small Business Disclosure Format (Check One): []
Yes  [X] No             SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES Table of Contents December 31, 2007 __________________________________________________________________________________________    PAGEPART
I - FINANCIAL INFORMATION Item
1.  Financial Statements F-1 Item
2.  Management's Discussion and Analysis or Plan of Operation 2 Item
3.  Controls and Procedures 5  PART II - OTHER
INFORMATION Item
1.  Legal Proceedings 6  Item
2.  Unregistered Sale of Equity Securities and Use of Proceeds 7  Item
3.  Defaults Upon Senior Securities  7  Item
4.  Submission of Matters to a Vote of Security Holders  7  Item
5.  Other Information 7  Item
6.  Exhibits  7  SIGNATURES 7    SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED
BALANCE SHEETDecember 31,
2007(Unaudited)AssetsCurrent
assetsCash and cash
equivalents
$
20,664Accounts
receivable

121,513Total
current assets

142,177Other
assetsCapitalized
costs and permits

4,288,475Research
vessel

125,000Equipment, net
of depreciation of $5,005

11,707Investments,
net of allowance of $173,868

51,962Notes
receivable, net of allowance of $832,849

-Total other
assets

4,477,144Total
assets
$
4,619,321Liabilities and Shareholders' Equity
(Deficit)Current
liabilitiesAccounts
payable and accrued expenses
$
484,801Related party
notes payable

3,516,497Due to related
parties

1,483,395Notes
payable

1,136,776Total current
liabilities

6,621,469Total
liabilities

6,621,469Commitments and
contingencies

-Shareholders'
equity (deficit)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;30,137,017
issued and outstanding

30,137Additional
paid-in capital

19,118,822Currency
translation adjustment

(11,799)Minority
interest

(803,530)Accumulated
deficit

(20,335,778)Total
shareholders' equity (deficit)

(2,002,148)Total
liabilities and shareholders' equity (deficit)
$
4,619,321   See accompanying
notes to consolidated financial statements, which are an integral part of the
financial statements F-1    SOVEREIGN EXPLORATION ASSOCIATES INTERNATIONAL,
INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)For the three months ended

For the six months endedDecember 31,

December 31,2007

2006

2007

2006(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)Revenue
$
312,303
$
646,513
$
395,550
$
1,067,723Cost of sales

237,880

556,888

280,750

944,622Gross Profit

74,423

89,625

114,800

123,101Operating expensesSalaries and wages

25,740

131,903

77,220

233,199General and administrative

102,268

217,568

392,558

209,177Legal and professional fees

179,214

105,207

158,819

193,316Total operating expenses

307,222

454,678

628,597

635,692Income (loss) from operations

(232,799)

(365,053)

(513,797)

(512,591)Other income (expenses)Stock issued - settlement agreement

-

-

-

(364,000)Depreciation and amortization

1,668

-

(5,005)

-Interest income

-

-

-

-Interest expense

(41,254)

(34,382)

(73,318)

(48,724)Total other (income) expense

(39,586)

(34,382)

(78,323)

(412,724)Income (loss) before income taxes

(272,385)

(399,435)

(592,120)

(925,315)Provision for income taxes

-

-

-

-Net income (loss)
$
(272,385)
$
(399,435)
$
(592,120)
$
(925,315)Net operating loss per common shareBasic

(0.01)

(0.02)

(0.02)

(0.04)Diluted

-

(0.01)

(0.01)

(0.03)Net loss per common shareBasic

(0.01)

(0.02)

(0.02)

(0.04)Diluted

-

(0.01)

(0.01)

(0.03)Weighted average of common shares
outstandingBasic

29,991,291

26,203,166

29,895,769

26,203,166Diluted

69,991,291

27,113,166

66,895,769

27,113,166Dividends declared per common share
$
-
$
-
$
-
$
-  See accompanying
notes to consolidated financial statements, which are an integral part of the
financial statements F-2    SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF CASH FLOWS(Unaudited)For the six months endedDecember 31,2007


2006(Unaudited)


(Unaudited)Operating
activities:Net loss
$
(592,120)

$
(1,012,672)Adjustments to
reconcile net loss from operations tonet cash (used
in) operating activities:Depreciation
and amortization

5,005


-Stock
issued for services

(94,350)


-(Increase)
decrease in:Capitalized
costs and permits

(305,769)


(501,745)Accounts
receivable

(201,980)


-Increase
(decrease) in:Accounts
payable and accrued expenses

446,897


163,870Due to
related parties

235,689


479,614Net cash
(used in) operating activities

(506,628)


(870,933)Investing
activities:Purchase
of equipment

(15,044)


-Net cash
(used in) investing activities

(15,044)


-Financing
activities:Issuance
of common stock




364,000Proceeds
from related party notes payable

-


660,000Payments
on related party notes payable

-


(156,983)Net cash
provided by financing activities

-


867,017Net
(decrease) increase in cash and cash equivalents

(521,672)


(3,916)Cash and
cash equivalents, beginning of period

542,336


115,454Cash and
cash equivalents, end of period
$
20,664

$
111,538Supplemental
disclosure of cash flow information:Interest
paid
$
-

$
-Taxes
paid

-


-      See accompanying
notes to consolidated financial statements, which are an integral part of the
financial statements F-3    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE 1 - BASIS OF
PRESENTATION  The
accompanying unaudited consolidated financial statements of Sovereign
Exploration Associates International, Inc. (the Company) have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-QSB. In the
opinion of management, all material adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended December 31, 2007 are not
necessarily indicative of the results that are expected for the year ending June
30, 2008. The information contained in this Form 10-QSB should be read in
conjunction with the audited financial statements filed as part of the Company's
Form 10-KSB for the year ended June 30, 2007.  NOTE 2 - GOING
CONCERN  The
accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates the continuation of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. The Company has incurred an accumulated deficit of $20,335,778 as of
December 31, 2007. The Companys subsidiaries have capitalized all of their
ocean exploration and archaeologically sensitive recoveries of artifacts,
treasure trove and/or cargo from shipwrecks costs to-date.  The Company
plans to obtain additional financing through the sale of publicly traded stock,
limited liability company member units of its subsidiaries and/or debt
financing. There is no assurance these efforts will be successful. The Company
has received extensions of the due dates for payments on the demand notes
payable as of December 31, 2007. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability and
classifications of reported asset amounts or the amounts of liabilities that
might result from the outcome of this uncertainty.  NOTE 3 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES  PRINCIPLES OF
CONSOLIDATION  The
accompanying consolidated financial statements, as presented herein, are
prepared on the accrual basis of accounting under the principles of
consolidation consisting of the accounts of the Company and its
subsidiaries.  As of
December 31, 2007, the Company's subsidiaries and the related equity ownership
are as follows:  Historic Discoveries, Inc.  Historic Discoveries is the Company's primary subsidiary and is
wholly-owned by the Company.  The Company acquired Historic Discoveries in
connection with the change in control on October 17, 2005, and it has since made
additional investments in Historic Discoveries. Historic Discoveries has two
wholly-owned subsidiaries, Artifact Recovery & Conservation Inc. ("ARC") and
Sea Research, Inc. ("SRI").  The
Company and Historic Discoveries had agreed to distribute 20% of the net profits
arising out of the exploitation of permits, licenses, finder fees rights,
contracts and other rights (collectively, "permits") held by ARC to its former
corporate parent, Sovereign Marine Explorations, Inc. ("SME"), and to distribute
20% of the net profits arising out of the exploitation of permits held by SRI to
its former corporate parent, Sea Hunt, Inc. ("Sea Hunt").  On May
19, 2007, the Company issued 10,000,000 shares of Convertible Preferred Stock in
exchange for this 20% net profits participation agreement.  The stock
carries a 4 to1 conversion feature into 40,000,000 common shares of the
Company. F-4   SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  Artifact
Recovery & Conservation, Inc.  ARC
holds licenses for some of the Companys most promising sites. ARC has already
recovered substantial artifacts from Le Chameau, a French ship lost off Cape
Lorembec, Cape Breton Island, Nova Scotia, on August 27, 1725. The Chameau
carried  extensive  ladings of  specie,  military
 supplies,  trade  goods,  and commercially-consigned
 freight,  as well as the  personal  effects  of
 wealthy passengers. ARC submitted artifacts from the Chameau and other
ships to the Nova Scotia government for artifact selection in 2005, and the
selection process was completed in March 2006.  ARC has
also conducted extensive exploratory efforts in Fantome Cove, near Prospect,
Nova Scotia. The H.M.S. Fantome and accompanying ships are believed to have been
lost in Fantome Cove on November 24, 1814. The Fantome is particularly
historically significant, as it played a role in the War of 1812 and potentially
could have been carrying plunder from the sacking of Washington, DC in August
1814. ARC's exploratory efforts have confirmed that it has located at least two
historical shipwrecks, although it has not specifically confirmed that either
wreck is that of the Fantome. During its most recent reconnaissance efforts in
late summer, 2006, ARC identified two very large concretion fields, and its
divers observed flatware, artifacts, ship fittings, and thousands of coins in
the concretions.  Because Fantome Cove is in Canadian waters but may
involve British ships and American plunder, any shipwrecks located in Fantome
Cove may be subject to competing claims.  The United Kingdom has filed a
formal notice on the H.M.S. Fantome that has caused a delay in the Companys
plans for a recovery in Fantome Cove.  ARC was
notified on August 31, 2006, its application for a Class B recovery permit for
the Fantome Cove treasure trove site has not been approved.  A Class B
permit is required before ARC can make any substantial recoveries from the site.
The Nova Scotia Department of Tourism, Culture & Heritage has recommended
that ARC and Le Chameau Explorations Limited (a wholly-owned subsidiary of the
Company), secure permission from the United Kingdom. The Companys management
and counsel believe that the admiralty and treaty laws governing the site will
substantiate ARC's and Le Chameau Explorations Limited's Interest as license
holder. As of December 31, 2007, the Company is arranging meetings with
representatives from the United Kingdom and is waiting for Class B permit
approval.  Sea Research,
Inc.  SRI
holds the rights to seven sites, several of which have multiple ships.  The
wrecked ships are believed to have contained diverse cargoes, including money,
bullion, religious artifacts, jewelry, and other personal items.  SRI also
owns an exploratory vessel, the Sea Quest, through its wholly-owned subsidiary,
Sea Quest, Inc.  Sovereign Exploration Associates International of Spain,
Inc.  Sovereign Exploration Associates International of Spain, Inc.
("SEAI - Spain"), a wholly-owned subsidiary of the Company, was acquired in
November 2005 from unrelated parties in exchange for $800,000 of convertible
debentures.  The debentures were due on November 15, 2006, with accrued
interest at a rate of 6% per annum. The Company may, at any time prior to
November 15, 2006, convert the principal amount of the debentures into common
stock of the Company at the average closing price of the Company's common stock
for the ten business days prior to the conversion date. The debenture holders
may, at any time after November 15, 2006, convert the principal amount of the
debenture into common stock of the Company at the average closing price of the
Company's common stock for the ten business days prior to the conversion date.
 SEAI - Spain has secured the finder's rights to four shipwrecks in Spain
with potential historic and intrinsic value.  Effective November 15, 2006,
the Company converted the debentures into 848,000 (including accrued interest of
$48,000) common shares of the Company at a price of $1.00 per share.     F-5   SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  Lavelle
Holdings, Inc.  On June
11, 2007, the Company acquired 100% of the common stock of the Lavelle Holdings,
Inc., a company based in Texas, for consideration of $300,000 cash at closing
plus a cash amount equal to five (5) times the net profit of Lavelle Holdings,
Inc., if any, for a one (1) year period beginning on or the date that is six (6)
months after the closing date.  This amount will be paid in cash and/or
stock on or before nineteen (19) months following the closing date.
 Management is unable to determine the amount of this contingent liability
as of the balance sheet date of December 31, 2007.  If the Company becomes
insolvent during the nineteen (19) months following the closing date, the
selling shareholders have the right of first refusal to repurchase the purchased
stock from the Company.  In
consideration for certain rights to purchase common stock of Lavelle Holdings,
Inc. the Company paid $225,000, in cash, to the rights holders, at closing.
 The total cash paid for this acquisition at closing on June 11, 2007 was
$525,000.  Lavelle Holdings, Inc. is a wholly-owned subsidiary of the
Company. LeChameau Explorations Limited  On June
13, 2007, the Company acquired 100% of the issued and outstanding capital stock
of LeChameau Explorations Limited, a company based in Nova Scotia, for total
consideration of USD $274,009.  The payment for the stock is in the form of
a note agreement, which is collateralized by the common stock of the Company.
 The note is due June 13, 2008.  If the Company defaults, the note is
convertible to the Companys common stock at a rate of 1.25 times the
outstanding liability as of its due date valued at the ten day average of the
stock price prior to the conversion date. Under this acquisition, the Company
now owns twenty-five licenses under the Nova Scotia Treasure Trove Act.
LeChameau Explorations Limited is a wholly-owned subsidiary of the Company.  Investments  The
Company accounts for investments, where the Company holds from 20% up to 50%, in
the common stock, or membership interest, of an entity, using the equity method.
The investment is initially recorded at cost and the carrying amount is adjusted
to recognize the Companys proportionate share of the earnings or losses of the
investee after the date of acquisition. The amount of the adjustment is included
in the determination of net income or loss of the Company in the period of the
adjustment. Any dividends received from the investee reduce the carrying value
of the investment.  Gulf Coast Records, LLC  The
investment (a 49% minority interest) and note receivable in Gulf Coast Records,
LLC was acquired as part of the Exchange Agreement dated October 17, 2005.
 In the year ended June 30, 2006, while reporting under the 1940 Act as a
business development company, the Board of Directors agreed with managements
assessment to write this investment down to zero based on the information
received from the management of Gulf Coast Records, LLC.  For the six
months ended December 31, 2007 and 2006, the investment in and note receivable
to Gulf Coast are being carried at a zero value, which is the lower of cost or
market.  Reds Caribbean  The
investment (a 30% minority interest) in Reds Caribbean was acquired in the stock
purchase agreement with the shareholders of Lavelle Holdings, Inc. on June 11,
2007. As of December 31, 2007, the Company is recording this investment at its
cost of $51,962.  The Company owns a 30% equity interest in Reds Caribbean
and the net asset value of the 30% equity interest is $0.   F-6   SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  Revenue
Recognition  The
Company recognizes revenue using the accrual method of accounting wherein
revenue is recognized when earned and expenses and costs are recognized when
incurred.  Allowance for Bad Debts  As of
December 31, 2007, the allowance for bad debts was $0. Management of the Company
reviews the billing and collection activity on a regular basis and provides for
an allowance for bad debts based on its expectations for cash collections.
 The $121,513 in accounts receivable and the allowance for bad debts of $0
were all for Lavelle Holdings, Inc., a wholly-owned subsidiary of the Company.  Economic
Dependence  The
Companys wholly-owned subsidiary, Lavelle Holdings, Inc, which was acquired by
the Company in June 2007, has economic dependence for its revenue on less than
ten (10) customers and they have less than ten (10) vendors with whom they
conduct their business.  Fair Value of
Financial Instruments  The
Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash and cash equivalents, accounts receivable, accounts
payable and accrued payroll and other expenses, the carrying amounts approximate
fair value due to their short maturities. The amount shown for notes payable
also approximates fair value because the current interest rates offered to the
Company for debt of similar maturities are substantially the same.  Use of
Estimates  The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect certain reported amounts of assets
and liabilities and 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.  Accordingly, actual results could differ from
those estimates.  Cash
and Cash Equivalents  For the
purpose of the Consolidated Statement of Cash Flows, the Company considers cash
equivalents to be all highly liquid securities with an original maturity date of
three months or less.  Advertising costs  For the
six month periods ended December 31, 2007 and 2006, the Company did not incur
any advertising costs.  Segments  The
Company operates as one segment as defined by the Statement of Financial
Accounting Standards No. 131 Disclosures about Segments of an Enterprise and
Related Information.   F-7    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  Foreign Currency
Translation  The
accompanying consolidated financial statements are stated in United States
Dollars (USD).  For the six months ended December 31, 2007 and 2006, the
Company incurred a currency translation adjustment of $11,799 and $0,
respectively,  New Accounting
Pronouncements  In
July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the
accounting for uncertainty in income taxes by prescribing the recognition
threshold a tax position is required to meet before being recognized in the
financial statements. It also provides guidance on derecognizing,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The cumulative effects, if any, of applying FIN 48 will
be recorded as an adjustment to retained earnings as of the beginning of the
period of adoption. Additionally, in May 2007, the FASB published FASB
Staff Position No. FIN 48-1, "Definition of Settlement in FASB Interpretation
No. 48" ("FSP FIN 48-1"). FSP FIN 48-1 is an amendment to FIN 48. It
clarifies how an enterprise should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits. FSP FIN 48-1 is effective upon the initial adoption of FIN 48. The
Company does not expect the adoption of FIN 48 to have an effect on its
financial statements.  In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 157 ("FAS 157"), Fair Value
Measurements, which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles ("GAAP"), and expands
disclosures about fair value measurements. FAS 157 applies under other
accounting pronouncements that require or permit fair value measurements. Prior
to FAS 157, there were different definitions of fair value and limited guidance
for applying those definitions in GAAP. Moreover, that guidance was dispersed
among the many accounting pronouncements that require fair Value measurements.
Differences in that guidance created inconsistencies that added to the
complexity in applying GAAP. The changes to current practice resulting from the
application of FAS 157 relate to the definition of fair value, the methods used
to measure fair value, and the expanded disclosures about fair value
measurements. FAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years.  NOTE 4 - FIXED
ASSETS  Fixed
assets are stated at cost. The cost of equipment is charged against income over
their estimated useful lives, using the straight-line method of depreciation.
Repairs and maintenance which are considered betterments and do not extend the
useful life of equipment are charged to expense as incurred. When property and
equipment are retired or otherwise disposed of, the asset and accumulated
depreciation is removed from the accounts and the resulting profit and loss are
reflected in income.  NOTE 5 
CAPITALIZED COSTS  As of
December 31, 2007 and 2006, the Company accounted for its ocean exploration and
archaeologically sensitive recoveries of artifacts, treasure trove and/or cargo
from shipwrecks costs incurred to-date as capitalized costs.      F-8   SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE 6 - STOCK
ISSUED FOR SERVICES  During
the six months ended December 31, 2007, the Company issued 295,000 shares of
common stock for services rendered on behalf of the Company with a value of
$94,350, which was charged to legal and professional fees.  The Company did
not issue any stock for services during the six months ended September 30,
2006.  NOTE
7 - INCOME TAXES  The
Company has approximately $999,412 in gross deferred tax assets at December 31,
2007, resulting from net operating loss carryforwards. A valuation allowance has
been recorded to fully offset these deferred tax assets because the future
realization of the related income tax benefits is uncertain. As of December 31,
2007, the Company has federal net operating loss carry forwards of approximately
$999,412 available to offset future taxable income through 2027.  For the
six months ended December 31, 2007 and 2006, the difference between the tax
provision at the statutory federal income tax rate and the tax provision
attributable to loss before income taxes is as follows (in percentages):  Statutory federal income tax rate
34%State taxes - net of federal benefits
5%Valuation allowance
39%Income tax rate  net
0%  Net
change in valuation was $108,954  NOTE 8 - LEASE
ARRANGEMENTS  The
Company maintains shared office space in Pennsylvania and Florida with unrelated
companies controlled by certain officers of the Company.  As of December
31, 2007, the Company shares office space with these companies at no cost. Rent
expense for the six months ended December 31, 2007 and 2006 was $0 and $4,010,
respectively.  NOTE
9 - DEBENTURES  PAYABLE  5.25% convertible debenture dated June 29, 2005 with a
principal balanceof $40,000 due June 29, 2008 including principal and
interest
$
    102,961  For the
six months ended December 31, 2007 and 2006, the Company incurred interest
expense on this convertible debenture of $4,374 and $3,801, respectively.
 This convertible debenture was incurred prior to October 2005 by prior
management of the Company and continues to be in dispute because of issues
related to the conversion rates.           F-9    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE 10 -
AGREEMENTS  Prior
to the Exchange Agreement of October 17, 2005, as on file with the SEC, there is
a Revenue Agreement as outlined in Exhibit B of the Exchange Agreement, that
requires 20% revenue participation payable to the original owners of the permits
from the net recovery of the shipwrecks for the permits that have been assigned
to the subsidiaries of one of the Company's subsidiaries, Historic Discoveries,
Inc. The 20% revenue participation allows Historic Discoveries, Inc. to defer
permit transfer fees and align site permit cost with revenue generation,
eliminating the exposure associated with sites that do not produce a material
number of artifacts. Historic Discoveries, Inc. was only required to pay the 20%
revenue participation when sites produce net revenue.  The 20% revenue
participation also provides Historic Discoveries, Inc. the right of first
refusal on future sites, creating a mechanism for Historic Discoveries, Inc. and
its operating companies to build site inventory while deferring the associated
cost and reducing financial risk. The Revenue Agreement with the original owners
was executed prior to October 17, 2005. The original owners of these permits are
the beneficial owners of the controlling interest in the stock received in the
Exchange Agreement. Additionally, officers and directors of the Company hold
certain executive positions in Historic Discoveries, Inc. and its subsidiaries.
The Company and Historic Discoveries had agreed to distribute 20% of the net
profits arising out of the exploitation of permits, licenses, finder fees
rights, contracts and other rights (collectively, "permits") held by ARC to its
former corporate parent, Sovereign Marine Explorations, Inc. ("SME"), and to
distribute 20% of the net profits arising out of the exploitation of permits
held by SRI to its former corporate parent, Sea Hunt, Inc. ("Sea Hunt").
 On May 19, 2007, the Company issued 10,000,000 shares of Convertible
Preferred Stock in exchange for this 20% net profits participation agreement.
 The stock carries a 4 to1 conversion feature which allows the holders to
convert into 40,000,000 common shares of the Company.  NOTE 11 -
SETTLEMENT AGREEMENT AND GENERAL RELEASE  Effective June 30, 2006, the Company entered into a Settlement
Agreement and General Release (the Settlement Agreement") with Former
Management, KMA Capital Partners, Inc., and CF Holdings, LLC (collectively, the
"Settlement Agreement Parties") in order to reach a comprehensive resolution of
their disputes. The Settlement Agreement provides that the Settlement Agreement
Parties release all claims that they may have against the Company, its parents,
subsidiaries, affiliates, predecessors, successors, assigns, partners, agents,
representatives, and attorneys (collectively, "affiliated parties") and that the
Company releases all claims it may have against the Settlement Agreement Parties
and their respective affiliated parties. On December 26, 2006, 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.  NOTE 12 -
SHAREHOLDERS EQUITY AND ISSUANCE OF STOCK  As of
December 31, 2007, the authorized capital of the Company was 250,000,000 shares
of common stock (with voting rights), par value $.001.  For the six months
ended December 31, 2007 and 2006, the Company issued 295,000 and zero shares of
common stock, respectively.  NOTE 13 -
CONCENTRATION OF CREDIT RISK  Financial instruments, which potentially expose the Company to
concentrations of credit risk, consist principally of cash. As of December 31,
2007, the Company maintains its cash accounts with financial institutions
located in Pennsylvania, Florida, Texas and Nova Scotia.  The Federal
Deposit Insurance Corporation (FDIC) guarantees the Company's deposits in
US-based financial institutions up to $100,000.  Historically, the Company
has not experienced any losses on its deposits in excess of federally insured
guarantees.   F-10   SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE
14 - NOTES PAYABLE  On June
4, 2007, the Company received $1,000,000 cash under a promissory note.
 Under the terms of the note, the Company is obligated to pay the note in
one payment of all outstanding principal plus all accrued unpaid interest on or
before the six month anniversary of the closing date unless the note holders
agree to extend the note, in which case the note shall become a demand note,
payable upon demand or at such later date as specified by the note holders to
Company in writing, in the note holders sole discretion.  The Companys
stock is the collateral that supports this note.  Unless otherwise agreed
or required by applicable law, payments will be applied first to any accrued
unpaid interest; then to principal; then to any late charges; and then to any
unpaid collection costs.  The annual interest rate for this note is
computed on a 365 days per year basis. The Company will pay the note holders at
their respective address or at such other place as the note holders may
designate in writing. The interest rate on this note is six percent (6%) per
annum calculated on the principal amount of the Note then outstanding. The
Company may make a prepayment, in whole or in part, of this note without the
prior consent of the note holders with no prepayment penalty. At the maturity
date of the note, the note holders shall be entitled to purchase 250,000 shares
of common stock of the Company at a price of $.20 per share. The note holders
will also be entitled to purchase an additional 250,000 shares of common stock
of the Company at the closing price of the Company stock as reported on the
OTCBB on the closing date and, in addition, these shares must be exercised
within one year from the closing date.  As of
December 31, 2007, the holders of this note have agreed to extend the payment
date on the note and they have not yet exercised their right to purchase
common stock of the Company.  NOTE
15 - RELATED PARTY TRANSACTIONS  ACCRUED PAYROLL AND EXPENSES; DUE TO RELATED PARTIES  For the
six months ended December 31, 2007, there are no accruals for salaries and
unreimbursed expenses.  NOTE 16 - LEGAL
PROCEEDINGS  In a
matter related to KMA Capital Partners Ltd, James Jenkins and Charles Giannetto,
filed as KMA Capital Partners Ltd., v. Sovereign Exploration Association,
Inc., et al, in the Circuit Court of the Ninth Judicial Circuit, in and for
Orange County, Florida, the Company claims that KMA Capital Partners Ltd, James
Jenkins and Charles Giannetto are in breach of a Leak Out Agreement, which
restricts the number of shares of the Companys common stock, traded as SVXA.OB,
they are allowed to sell or transfer.  As of June 30, 2006, the court
entered an Order which limits Mr. Jenkins and Mr. Giannetto to selling no more
than 2,000 shares of the Companys common stock per trading day.  As of
June 30, 2007, there is no liability under this matter that requires the
establishment of a liability within the accompanying consolidated financial
statements.  The
Company is one of several defendants in a law suit, Patricia A. Mullican v.
Sovereign Exploration Associates International, Inc., et alin the Circuit
Court of the Ninth Judicial Circuit, in and for Orange County, Florida.
 The plaintiff in this case is seeking damages for the alleged failure to
pay two (2) debentures issued by TS&B Holdings to Mr. Mullican (one for
$150,000 and the other for $250,000) as well as an unpaid promissory note for
$50,000 plus accrued interest on the debentures and the promissory note along
with attorney fees.  TS&B Holdings, Inc. subsequently became Cali
Holdings, Inc., which was acquired by the Company in October 2005.  It is
the Companys position that these debts are not its responsibility, to the
extent that neither the debentures nor promissory notes were disclosed at the
time Cali Holdings, Inc. was acquired by the Company.  There are numerous
defenses which the Company will be relying upon to support its legal position
that these obligations are not its responsibility. As of December 31, 2007, the
accompanying consolidated financial statements do not provide for any liability
in the event that the Company is deemed responsible in this case. F-11    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE
17 RELATED
PARTY NOTES PAYABLE  As of December 31,
2007, the related party notes payable were as follows:  Demand note
payable of $350,000 plus accrued interestat 6% per annum
for the purchase of the original permits
$
        424,789Term Note
payable of $274,009 due June 13, 2008 plusat 6% per annum
for the acquisition of LeChameauLeChameau
Explorations Limited  June 13, 2007
287,017Demand Note
payable of $250,000 plus accrued interestat 6% per annum
for the balance of the Fantome Cove Project
269,841Demand Note
payable of $500,000 plus accrued interestof $3,444 per
month as a direct pass through fromNova Savings
Bank  - origination date was July 10,
2006              
(b)
561,772Demand Note
payable of $160,000 due on November 15, 2007plus accrued
interest of the lesser of 0.9% or the legalrate under
Texas law  origination date was November 15, 2006
   (a)
162,168Demand Note
payable of $600,000 due on November 15, 2007plus accrued
interest of the lesser of 0.9% or the legalrate under
Texas law  origination date was November 15, 2006    (a)
674,136Demand note
payable - advances to Sea Research, Inc.
574,355Demand note
payable - advances to Sovereign ExplorationAssociates
International, Inc.
56,719Demand note
payable - advances to InterspaceExplorations
Limited plus accrued interest at 6% per annum
505,700Total related
party notes payable - all current
$      3,516,497   (a)
these two demand notes payable are being held by the chairman of the Company and
an affiliated entity.  He has agreed to extend the due dates for payments
on these notes, however, as of December 31, 2007; no formal documentation has
been prepared to memorialize the extensions.  (b)
this demand note payable is being held by the President and CEO of the
Company.  He has agreed to extend the due date for payment on this note,
however, as of December 31, 2007, no formal documention has been prepared to
memorialize the extension.      F-12      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION  FORWARD-LOOKING
STATEMENTS  THIS
REPORT CONTAINS STATEMENTS THAT WE BELIEVE ARE, OR TO BE CONSIDERED TO BE,
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. ALL STATEMENTS OTHER THAN STATEMENTS OF
HISTORICAL FACT INCLUDED IN THIS REPORT REGARDING THE PROSPECTS OF OUR INDUSTRY
OR OUR PROSPECTS, PLANS, FINANCIAL POSITION OR BUSINESS STRATEGY, DO CONSTITUTE
FORWARD-LOOKING STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY
CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "WILL," "EXPECT,"
"INTEND," "ESTIMATE," "FORESEE," "PROJECT," "ANTICIPATE," "BELIEVE," "PLANS,"
"FORECASTS," "CONTINUE" OR "COULD" OR THE NEGATIVES OF THESE TERMS OR VARIATIONS
OF THEM OR SIMILAR TERMS. FURTHERMORE, SUCH FORWARD-LOOKING STATEMENTS THAT ARE
INCLUDED IN VARIOUS FILINGS THAT WE MAKE WITH THE SEC OR PRESS RELEASES OR ORAL
STATEMENTS MADE BY OR WITH THE APPROVAL OF ONE OF OUR AUTHORIZED EXECUTIVE
OFFICERS. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THESE
FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT ASSURE YOU THAT THESE
EXPECTATIONS WILL PROVE TO BE CORRECT. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO CERTAIN KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, AS WELL AS
ASSUMPTIONS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
REFLECTED IN THESE FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH
REFLECT MANAGEMENT'S OPINIONS ONLY AS OF THE DATE HEREOF. EXCEPT AS REQUIRED BY
LAW, WE UNDERTAKE NO OBLIGATION TO REVISE OR PUBLICLY RELEASE THE RESULTS OF ANY
REVISION TO ANY FORWARD-LOOKING STATEMENTS. YOU ARE ADVISED, HOWEVER, TO CONSULT
ANY ADDITIONAL DISCLOSURES WE MAKE IN OUR REPORTS TO THE SEC. ALL SUBSEQUENT
WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR PERSONS ACTING
ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS CONTAINED IN THIS REPORT. __________________________________________________________________________________________________  The
following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form
10-QSB.  Overview  The
Company was a financial service company providing financing and advisory
services to small and medium-sized companies throughout the United States.
Effective January 5, 2004, the Company's shareholders approved the proposal to
allow the Company to elect to be treated as a business development company
("BDC") under the 1940 Act. The Company on September 22, 2006, withdrew its
election to be treated as a BDC. Following the withdrawal of its election, the
Company carries on a marine recovery and explorations business, which it
conducts through subsidiaries and controlled companies, and will be managed so
that it will not be subject to the provisions of the 1940 Act.  The
increasing complexity of the business environment and applicable authoritative
accounting guidance required the Company to closely monitor its accounting
policies.  The Company had identified critical accounting policies
that require significant judgment. The following summary of the Companys
critical accounting policies is intended to enhance your ability to assess its
financial condition and results of operation and the potential volatility due to
changes in estimates.       2   Valuation
of Investments  The
Company is no longer subject to independently valuing its private investments as
value is defined in Section 2(a)(41) of the 1940 Act as,  (i) the
 market  price for those securities for which a market quotation is
readily available and (ii) for all other securities and assets, fair value is
determined in good faith by the board of directors.  As of
December 31, 2007, the following is a list of the private companies in which the
Company had an investment in and notes receivable, stated at the lower of cost
or market value;  FairMarketName of Company
Cost
ValueGulf Coast
Records, LLCMinority
Investment (49%) and Note Receivable
$
                    1,006,717
$
                               -Reds Caribbean
- held by Lavelle Holdings, Inc.Minority
Investment (30%)
$
                         51,962
$
                         51,962Totals
$
                    1,058,679
$
                         51,962  The
investments are reflected at the lower of cost or market.  Since there is
typically no readily ascertainable market value for the investments in its
portfolio, the Company valued substantially all of its investments at the lower
of cost or market as determined in good faith by the board of directors pursuant
to a valuation policy and consistent valuation process.  Because of the
inherent uncertainty in determining the fair value of investments that do not
have a readily ascertainable market value, the fair value of its investments
determined in good faith by the board of directors may differ significantly from
the values that would have been used had a ready market existed for the
investments, and the differences could be material.  Initially, the fair value of each such portfolio investment was
based upon original cost.  There is no single standard for determining fair
value in good faith. As a result, determining fair value requires the judgment
be applied to the specific facts and circumstances of each portfolio investment.
 The Board of Directors considers fair value to be the amount which the
Company may reasonably expect to receive for portfolio securities when sold on
the valuation date.  Gulf Coast Records, LLC  The
investment (a 49% minority interest) and note receivable in Gulf Coast Records,
LLC was acquired as part of the Exchange Agreement dated October 17, 2005.
 In the year ended June 30, 2006, while reporting under the 40 Act as a
business development company, the Board of Directors agreed with managements
assessment to write this investment down to zero based on the information
received from the management of Gulf Coast Records, LLC.  As of December
31, 2007, the investment in and note receivable to Gulf Coast is being carried
as zero, which is the lower of cost or market.  Reds
Caribbean  The
investment (a 30% minority interest) in Reds Caribbean was acquired in the stock
purchase agreement with the shareholders of Lavelle Holdings, Inc. on June 11,
2007.  As of December 31, 2007, the Company is recording this investment at
its cost of $51,962.     3   Valuation
of Loans and Debt Securities  The
Company did not value its loans or debt securities above cost, but loans and
debt securities were subject to fair value write-down when the asset is
considered impaired with respect to the Companys investments.  As of
December 31, 2007, the note receivable to Gulf Coast Records, LLC of $832,849
was considered impaired and continues to be carried as zero.  The
investment is Reds Caribbean was acquired in June 2007 in conjunction with the
acquisition of Lavelle Holdings, which is not considered as impaired and it is
being carried at its original cost.  Financial
Condition  Comparison of
operating results for the three and six months ended December 31, 2007 and
2006:  Net
Sales  Net
sales for the three months ended December 31, 2007 were $312,303, compared to
$646,513 for the three months ended December 31, 2006.  The sales were from
the Companys wholly-owned subsidiary, Lavelle Holdings, Inc.  The
Companys subsidiaries have yet to realize any revenue from the artifacts they
have recovered to-date.  Net
sales for the six months ended December 31, 2007 were $395,550, compared to
$1,067,723 for the six months ended December 31, 2006.  The sales were from
the Companys wholly-owned subsidiary, Lavelle Holdings, Inc.  The
Companys subsidiaries have yet to realize any revenue from the artifacts they
have recovered to-date.  Gross Profit  Gross
profit for the three months ended December 31, 2007 was $74,423 compared to
$89,625 for the three months ended December 31, 2006.  The decrease was due
to lower sales.  Gross
profit for the six months ended December 31, 2007 was $114,800 compared to
$123,101 for the six months ended December 31, 2006.  The decrease was due
to lower sales.  Operating Expenses  Operating expenses for the three months ended December 31, 2007
were $307,222 compared to $454,678 for the three months ended December 31, 2006.
 The increase was primarily due to an increase in legal and professional
fees.  Operating expenses for the six months ended December 31, 2007 were
$628,597 compared to $635,692 for the six months ended December 31, 2006.
 The decrease was primarily due to a net decrease of $7,095 in expenses.
The parent companys officers agreed to forego salaries in 2007; the increase in
general and administrative expenses were for Lavelle Holdings, Inc.  Interest Expense  Interest expense for the three months ended December 31, 2007 was
$41,254 compared to $34,382 for the three months ended December 31, 2006.
 The increase was due to additional debt financing received by the
Company.  Interest expense for the six months ended December 31, 2007 was
$73,318 compared to $48,724 for the six months ended December 31, 2006.
 The increase was due to additional debt financing received by the
Company.  Liquidity and Capital Resources  As of
December 31, 2007, total assets increased from December 31, 2006 by $1,166,926
or 33.8% to $4,619,321.  Cash increased by $11,700 from December 31, 2006
primarily because of advance by officers of the Company in the three months
ended December 31, 2007.  4   As
of December 31, 2007 and 2006, cash and cash equivalents were approximately .45%
and .26% of total assets, respectively.  Capitalized costs and permits increased from December 31, 2006 by
$1,420,850 or 49.5% to $4,288,475, which was primarily funded by the issuance of
common stock, proceeds from notes payable and proceeds from related party notes
payable.  Investments of $51,962 represent Lavelle Holdings, Incs minority
ownership in Reds Caribbean.  The
Company does not expect its cash on hand and cash generated from operations to
be adequate to meet its cash needs at its current level of operations, including
the next twelve months. The Company intends to seek to raise additional funds
from investors, either directly or through its subsidiaries or controlled
companies, including special-purpose entities formed to conduct specific marine
salvage operations.  There can be no assurance that the Companys
fund-raising efforts will be successful.  Quantitative and Qualitative Disclosures about Market
Risk  The
Companys investment activities contain elements of risk. The portion of the
Companys investment portfolio consisting of equity or equity-linked debt
securities in private companies was subject to valuation risk.  Because
there was typically no public market for the equity and equity-linked debt
securities in which it invested, the valuation of the equity interest in the
portfolio is stated at "fair value" and determined in good faith by the Board of
Directors on a quarterly basis in accordance with the Company's investment
valuation policy. In the absence of a readily ascertainable market value, the
estimated value of the Companys portfolio may have differed significantly from
the value that would be placed on the portfolio if a ready market for the
investments existed.  At times a portion of the Companys portfolio may
have included marketable securities traded in the over-the-counter market. In
addition, there may have been a portion of the Companys portfolio for which no
regular trading market existed.  In order to realize the full value of a
security, the market must have traded in an orderly fashion or a willing
purchaser must be available when a sale is to be made.  Should an economic
or other event occur that would not allow the markets to trade in an orderly
fashion the Company may not have been able to realize the fair value of its
marketable investments or other investments in a timely manner.  As of
December 31, 2007, the Company did not have any off-balance sheet investments or
hedging investments.  Impact of Inflation  The
Company does not believe that its business was materially affected by inflation,
other than the impact inflation may have on the securities markets, the
valuations of business enterprises and the relationship of such valuation to
underlying earnings, all of which will influence the value of the Company's
investments.  ITEM 3. CONTROLS AND
PROCEDURES  CEO and CFO
Certifications  As of
the end of the period covered by this quarterly report, the Company carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer ("the Certifying
Officers"), an evaluation of the effectiveness of our "disclosure controls and
procedures." The certifications of the CEO and the CFO required by Rules
13a-14(a) and 15d-14(c) of the Securities Exchange Act of 1934, as amended (the
"Certifications") are filed as exhibits to this report.  This
section of this report contains information concerning the evaluation of our
"disclosure controls and procedures" (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) ("Disclosure Controls") and changes to internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
("Internal Controls") referred to in the Certifications and should be read in
conjunction with the Certifications for a more complete understanding of the
topics presented.   5   Evaluation
of Disclosure Controls  The
Company maintains controls and procedures designed to ensure that they are able
to collect the information that is required to be disclosed in the reports they
file with the Securities and Exchange Commission (the "SEC") and to process,
summarize and disclose this information within the time period specified in the
rules of the SEC. The Companys Chief Executive Officer and Chief Financial
Officer are responsible for establishing, maintaining and enhancing these
procedures. The officers are also responsible, as required by the rules
established by the SEC, for the evaluation of the effectiveness of these
procedures.  Based
on management's evaluation (with participation of our principal executive
officer and principal financial officer), as of the end of the period covered by
this report, the principal executive officer and principal financial officer
concluded that no deficiencies were identified in the Company's internal
controls over financial reporting which constituted a "material weakness."
Accordingly, management concluded that the Company's disclosure controls and
procedures were effective.  Limitations on
the Effectiveness of Controls  The
Company's management does not expect that their disclosure controls or their
internal controls over financial reporting will prevent all error and fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, but not absolute, assurance that the objectives of a control system
are met. Further, any control system reflects limitations on resources, and the
benefits of a control system must be considered relative to its costs. These
limitations also include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people or by management's override of a
control. A design of a control system is also based upon certain assumptions
about potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
may not be detected.  Changes in Internal Controls  The
Company maintains a system of internal controls designed to provide reasonable
assurance that transactions are executed in accordance with management's general
or specific authorization; transactions are recorded as necessary to permit
preparation of financial statements in conformity with Generally Accepted
Accounting Principles ("GAAP").  It is the responsibility of Companys
management to establish and maintain adequate internal control over financial
reporting.  PART II: OTHER
INFORMATION  Item
1. Legal
Proceedings  In a
matter related to KMA Capital Partners Ltd, James Jenkins and Charles Giannetto,
filed as KMA Capital Partners Ltd., v. Sovereign Exploration Association,
Inc., et al, in the Circuit Court of the Ninth Judicial Circuit, in and for
Orange County, Florida, the Company claims that KMA Capital Partners Ltd, James
Jenkins and Charles Giannetto are in breach of a Leak Out Agreement, which
restricts the number of shares of the Companys common stock, traded as SVXA.OB,
they are allowed to sell or transfer.  As of June 30, 2006, the court
entered an Order which limits Mr. Jenkins and Mr. Giannetto to selling no more
than 2,000 shares of the Companys common stock per trading day.  As of
December 31, 2007, there is no liability under this matter that requires the
establishment of a liability within the accompanying consolidated financial
statements.  The
Company is one of several defendants in a law suit, Patricia A. Mullican v.
Sovereign Exploration Associates International, Inc., et alin the Circuit
Court of the Ninth Judicial Circuit, in and for Orange County, Florida.
 The plaintiff in this case is seeking damages for the alleged failure to
pay two (2) debentures issued by TS&B Holdings to Mr. Mullican (one for
$150,000 and the other for $250,000) as well as an unpaid promissory note for
$50,000 plus accrued interest on the debentures and the promissory note along
with attorney fees.  TS&B Holdings, Inc. subsequently became Cali
Holdings, Inc., which was acquired by the Company in October 2005.  6   It
is the Companys position that these debts are not its responsibility, to the
extent that neither the debentures nor promissory notes were disclosed at the
time Cali Holdings, Inc. was acquired by the Company.  There are numerous
defenses which the Company will be relying upon to support its legal position
that these obligations are not its responsibility. As of December 31, 2007, the
accompanying consolidated financial statements do not provide for any liability
in the event that the Company is deemed responsible in this case.  ITEM 2. UNREGISTERED
SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.  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.  Section 302 CEO and
CFO Certifications  Section 906 CEO and
CFO Certifications   SIGNATURES   Pursuant to the
 requirements of Section 3 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report on Form 10-QSB to be signed
on its behalf by the undersigned, thereunto duly authorized.  SOVEREIGN EXPLORATION ASSOCIATES INTERNATIONAL, INC   February
12, 2008 By:
/s/ Robert D. Baca Date Robert
D. Baca  President
and Chief Executive Officer   February
12, 2008 By:
/s/ Martin Thorp Date Martin
Thorp  Chief
Financial Officer         7