UNITED
STATES SECURITIES AND EXCHANGE COMMISSION Washington, 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 September 30, 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 November 12,
2007 there are 29,222,017 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 September 30,
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 SHEETSeptember 30,
2007(Unaudited)AssetsCurrent
assetsCash and cash
equivalents
$
42,819Accounts
receivable

278,011Total
current assets

320,830Other
assetsCapitalized
costs and permits

4,294,741Research
vessel

125,000Equipment, net
of depreciation of $3,337

13,346Investments,
net of allowance of $173,868

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

-Total other
assets

4,485,049Total
assets
$
4,805,879Liabilities and Shareholders' Equity
(Deficit)Current
liabilitiesAccounts
payable and accrued expenses
$
709,692Related party
notes payable

3,465,151Due to related
parties

1,133,342Notes
payable

1,119,391Total current
liabilities

6,427,576Total
liabilities

6,427,576Commitments 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;29,942,017
issued and outstanding

29,942Additional
paid-in capital

19,130,745Currency
translation adjustment

(11,799)Minority
interest

(803,530)Accumulated
deficit

(19,967,055)Total
shareholders' equity (deficit)

(1,621,697)Total
liabilities and shareholders' equity (deficit)
$
4,805,879   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
STATEMENT OF OPERATIONSSeptember 30,
2007(Unaudited)For the three months endedSeptember 30,2007


2006(Unaudited)


(Unaudited)Revenue
$
205,664

$
421,210Cost of
sales

131,060


252,248Gross
Profit

74,604


168,962Operating
expensesSalaries and
wages

50,090


122,554General and
administrative

83,430


105,837Legal and
professional fees

22,662


88,109Total operating
expenses

156,182


316,500Income (loss)
from operations

(81,578)


(147,538)Other income
(expenses)Depreciation
and amortization

(3,337)


-Interest
income

494


-Interest
expense

(32,058)


(14,342)Total other
(income) expense

(34,901)


(14,342)Income (loss)
before income taxes

(116,479)


(161,880)Provision for
income taxes

-


-Net income
(loss)
$
(116,479)

$
(161,880)Net
operating loss per common shareBasic
$
(0.0042)

$
(0.0062)Diluted
$
(0.0039)

$
(0.0060)Net loss per
common shareBasic
$
(0.0042)

$
(0.0062)Diluted
$
(0.0039)

$
(0.0060)Weighted
average of common shares outstandingBasic

27,580,209


26,203,166Diluted

30,132,628


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
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)September 30,
2007(Unaudited)Series A


Additional
CurrencyPreferred Stock
Common Stock
paid-in
Translation
Minority
AccumulatedShares
Par
Value
Shares
Par
Value
capital
Adjustment
Interest
Deficit
TotalBalance,June 30,
2007
10,000,000
$
         -
29,842,017
$29,842
$19,100,845
$
          -
$(803,530)
$(19,850,576)
$(1,523,419)Issuance of
commonstock
underRegulation
S
-
-
100,000
100
29,900
-
-
-
30,000Currency
translation
-
-
-
-
-
(11,799)
-
-
(11,799)adjustmentNet loss
-
-
-
-
-
-
-
(116,479)
(116,479)Balance,September 30,
2007
10,000,000
$
      -
29,942,017
$ 29,942
$19,130,745
$
 (11,799)
$(803,530)
$(19,967,055)
$(1,621,697)                         See accompanying
notes to consolidated financial statements, which are an integral part of the
financial statements F-3    SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED
STATEMENT OF CASH FLOWSSeptember 30,
2007(Unaudited)For the three months endedSeptember 30,2007


2006(Unaudited)


(Unaudited)Operating
activities:Net loss
$
(116,479)

$
(161,880)Adjustments to
reconcile net loss from operations tonet cash (used
in) operating activities:Depreciation
and amortization

3,337Stock
issued for services

(30,000)


-(Increase)
decrease in:Capitalized
costs and permits

(312,035)


(326,182)Accounts
receivable

(45,482)


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

122,209


335,486Due to
related parties

(104,384)


(20,073)Net cash
(used in) operating activities

(482,834)


(172,649)Investing
activities:Purchase
of equipment

(16,683)


-Net cash
(used in) investing activities

(16,683)


-Financing
activities:Proceeds
from related party notes payable

-


500,000Payments
on related party notes payable

-


(132,733)Net cash
provided by financing activities

-


367,267Net
(decrease) increase in cash and cash equivalents

(499,517)


194,618Cash and
cash equivalents, beginning of period

542,336


115,454Cash and
cash equivalents, end of period
$
42,819

$
310,072Supplemental
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-4   SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 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 three month period ended September 30, 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 $19,967,055 as of
September 30, 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
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
September 30, 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-5   SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 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 September 30, 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-6   SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 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. 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 September 30, 2007.  If the Company becomes insolvent during
the nineteen (19) months following the closing date, the selling shareholders
have the right of 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 three
months ended September 30, 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 September 30, 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-7    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 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
September 30, 2007, the allowance for bad debts was $0. Management of the
Company reviews the billing and collection activity on a yearly basis and
provides for an allowance for bad debts based on its expectations for cash
collections.  The $278,011 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
three month periods ended September 30, 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-8   SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  Foreign Currency
Translation  The
accompanying consolidated financial statements are stated in United States
Dollars (USD).  For the three months ended September 30, 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. The Company does not expect the adoption of FAS 157 to have an effect on
its financial statements.  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
September 30, 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-9    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE 6 - STOCK
ISSUED FOR SERVICES  During
the three months ended September 30, 2007, the Company issued 100,000 shares of
common stock for services rendered on behalf of the Company with a value of
$30,000, which was charged to legal and professional fees.  The Company did
not issue any stock for services for the three months ended September 30,
2006.  NOTE
7 - INCOME TAXES  The
Company has approximately $890,458 in gross deferred tax assets at September 30,
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 September 30,
2007, the Company has federal net operating loss carry forwards of approximately
$890,458 available to offset future taxable income through 2027.  For the
three months ended September 30, 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 $113,142  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 September
30, 2007, the Company shares office space with these companies at no cost. Rent
expense for the three months ended September 30, 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
$
    100,929  For the
three months ended September 30, 2007 and 2006, the Company incurred interest
expense on this convertible debenture of $2,342 and 1,755, 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-10   SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE 10 -
AGREEMENTS  Prior
to the Exchange Agreement of October 17, 2005, there is was 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
September 30, 2007, the authorized capital of the Company was 250,000,000 shares
of common stock (with voting rights), par value $.001.  For the three
months ended September 30, 2007 and 2006, the Company issued 100,000 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 September 30,
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-11    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 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. 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.  NOTE
15 - RELATED PARTY TRANSACTIONS  ACCRUED PAYROLL AND EXPENSES; DUE TO RELATED PARTIES  For the
three months ended September 30, 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 June 30, 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-12    SOVEREIGN EXPLORATION
ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2007 AND 2006(UNAUDITED) __________________________________________________________________________________________________  NOTE
17 RELATED
PARTY NOTES PAYABLE  As of September 30,
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
$
        416,405Term Note
payable of $274,009 due June 13, 2008 plusat 6% per annum
for the acquisition of LeChameauLeChameau
Explorations Limited  June 13, 2007
281,353Demand Note
payable of $250,000 plus accrued interestat 6% per annum
for the balance of the Fantome Cove Project
264,516Demand Note
payable of $500,000 plus accrued interestof $3,444 per
month as a direct pass through fromNova Savings
Bank - July 10, 2006
551,660Term Note
payable of $160,000 due on November 15, 2007plus accrued
interest of the lesser of 0.9% or the legalrate under
Texas law - November 15, 2006
161,803Term Note
payable of $600,000 due on November 15, 2007plus accrued
interest of the lesser of 0.9% or the legalrate under
Texas law - November 15, 2006
672,621Demand note
payable - advances to Sea Research, Inc.
574,355Demand note
payable - advances to Sovereign ExplorationAssociates
International, Inc.
46,719Demand note
payable - advances to InterspaceExplorations
Limited plus accrued interest at 6% per annum
495,720Total related
party notes payable - all current
$      3,465,151          F-13     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 three 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 valuing its private investments as value is
defined in Section 2(a)(41) of the 1940 Act,  (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
September 30, 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;  Name
of Company Cost FMV
____  Gulf Coast Records,
LLC  Investment
and Note Receivable $
   1,006,717 $
          -  Reds
Caribbean  Investment $
        51,962 $
  51,962  Totals $
   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 September
30, 2007 and 2006,, 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 September 30, 2007, the Company is recording this investment
at its cost of $51,962.  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
September 30, 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.  3   Financial
Condition  Comparison of
operating results for the three months ended September 30, 2007 and
2006:  Total
assets increased by $1,892,591 or 65% to $4,805,879. Cash decreased by $267,253
primarily because of the use of the $1,000,000 cash the Company received under
the note payable in June 2007.  Accounts receivable of $278,011 as of
September 30, 2007 was that of Lavelle Holdings, Inc., a wholly-owned subsidiary
of the Company.  As of
September 30, 2007 and 2006, cash and cash equivalents were approximately .89%
and 10.64% of total assets, respectively.  Capitalized costs and permits increased by $1,600,647 or 59% to
$4,294,741, 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.  Results of
Operations  Comparison of
operating results for the three months ended September 30, 2007 and
2006:  For the
three months ended September 30, 2007 and 2006, the Company realized revenue of
$205,664 and 421,210, respectively.  The revenue was realized by Lavelle
Holdings, Inc., a wholly-owned subsidiary of the Company.  For the
three months ended September 30, 2007 and 2006, the loss from operations was
$116,479 and $161,880 primarily due to the lack of significant revenues and the
related cost of being an SEC registrant.  The Companys subsidiaries have
yet to realize any revenue from the artifacts they have recovered to-date.  The
operating loss decreased by $45,401 to $116,479 for the three months ended
September 30, 2007 primarily because the Company did not incur the significant
legal and accounting fees as it did during the three months ended September 30,
2006 wherein the shareholders elected to withdrawal the Companys election to be
a Business Development Company under the 1940 Act.  In addition, the
officers of the Company have agreed to continue to not accrue any salaries and
unreimbursed expenses.  Interest expense of $32,058 and $14,342 was incurred for the three
months ended September 30, 2007 and 2006, respectively, due to the accrued
interest on the notes payable, the debenture payable and the related party notes
payable.  For the
three months ended September 30, 2007 and 2006, net cash used in operating
activities was $446,849 and $172,649 primarily from the increase in capitalized
costs and permits in the Companys diving operations.  For the
three months ended September 30, 2007 and 2006, the Company issued stock for
services with a value of $30,000 and zero, respectively.  Interest Income  For the
three months ended September 30, 2007 and 2006, interest income was $494 and
zero, respectively.  The interest income is from a money market savings
account that the Company maintains in Florida.  Operating Expenses  For the
three months ended September 30, 2007 and 2006, total operating expenses were
$156,182 and $316,500, respectively. The operating expenses consisted of
salaries and wages incurred by Lavelle Holdings, Inc., general administrative
expenses and legal and professional fees.   4    Legal
and professional fees decreased by $65,447 or 74% to $22,662 for the three
months ended September 30, 2007 as compared to the three months ended September
30, 2006.  Liquidity and
Capital Resources  At
September 30, 2007 and 2006, the Company had $42,818 and $310,072 in cash and
cash equivalents, respectively. 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 contained 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
September 30, 2007 and 2006, 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 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
September 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.  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 September 30, 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   November
12, 2007 By:
/s/ Robert D. Baca Date Robert
D. Baca  President
and Chief Executive Officer   November
12, 2007 By:
/s/ Martin Thorp Date Martin
Thorp  Chief
Financial Officer         7