U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2003
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: 333-56848
SEAWRIGHT HOLDINGS, INC
Formerly PRE-SETTLEMENT FUNDING CORPORATION
(Exact name of Company as specified in its charter)
Delaware 54-1965220
(State or jurisdiction of incorporation) (I.R.S. Employer or
organization Identification No.)
600 Cameron Street, Alexandria, VA 22314
(Address of principal executive offices) (Zip Code)
Company's telephone number: (703) 340-1629
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark whether the Company (1) has 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 for such
shorter period that the Company was required to file such reports),
and (2) been subject to such filing requirements for the past 90
days. Yes X No___
Indicate the number of shares outstanding of each of the
issuer's class of common stock. The Registrant had 5,368,000 shares of its
common stock outstanding as of November 10, 2003.
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets at September 30, 2003 and December 31, 2002
Condensed Statement of Losses for the three and nine months to
September 30, 2003 and September 30, 2002 and the Period October 14,
1999(Date of Inception) Through September 30, 2003
Condensed Statement of Cash Flows for the nine months June 30,
2003 and 2002 and the Period October 14, 1999 (Date of Inception)
Through September 30, 2003
Notes to Condensed Financial Statements
Item 2. Management's Discussion And
Analysis Of Financial Condition
Or Plan Of Operations
Item 3. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission Of Matters To A Vote
Of Security Holders
Item 5. Other Information
Item 6. Exhibits And Reports On Form 8-K
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
Index to Financial Statements Page No.
Condensed Balance Sheets at September 30, 2003 and
December 31, 2002 F-4
Condensed Statement of Losses for the three and nine
months September 30, 2003 and September 30, 2002 and
the Period October 14, 1999 (Date of Inception)
Through September 30, 2003 F-5
Condensed Statement of Deficiency in Stockholders'
Equity for the Period October 14, 1999
(Date of Inception) Through September 30, 2003 F-6
Condensed Statement of Cash Flows for the nine
months September 30, 2003 and 2002 and the Period
October 14, 1999 (Date of Inception) Through
September 30, 2003 F-7
Notes to Condensed Financial Statements F-8 to F-18
SEAWRIGHT HOLDINGS INC
(Formerly PRE-SETTLEMENT FUNDING CORPORATION)
(A Development Stage Company)
CONDENSED BALANCE SHEETS
September 30, 2003 December 31, 2002
ASSETS ( Unaudited ) (Audited)
Current assets:
Cash and equivalents $ 43,585 $ 18
Loans receivable - 3228
Claims advances 6,500 8000
Prepaid expenses and other - 43
Total current assets 50,085 11,289
LIABILITIES AND DEFICIENCY IN STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued liabilities 126,135 866,914
Advances from shareholder 113,106 28,889
Total current liabilities 239,241 895,803
Long Term Liabilities:
Proceeds received for Preferred Stock to be issued 50,000 -
Preferred stock, par value, $.001 per share; 100,000
shares authorized; none issued and outstanding at
September 30, 2003 and December 31, 2002 - -
Commitments and Contingencies - -
Deficiency in Stockholders' Equity
Common stock, par value, $.001 per share; 19,900,000
shares authorized; 5,368,000 shares issued and outstanding
at September 30, 2003 and December 31, 2002 5,368 5,368
Additional paid-in-capital 183,652 183,652
Deficit accumulated during development stage (428,176) (1,073,534)
Deficiency in stockholder's equity (239,156) (884,514)
50,085 11,289
See accompanying notes to unaudited condensed financial information
SEAWRIGHT HOLDINGS, INC.
Formerly PRE-SETTLEMENT FUNDING CORPORATION
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The period
October 14, 1999
(Date of Inception)
For The Three Months For The Nine Months through
Ended Ended September 30
September 30 September 30 2003
2003 2002 2003 2002
Revenues: $ 0 $ 4375 $ 1,125 $ 8,102 $ 16,401
Costs and Expenses:
Selling, general
and administrative 5815 99,610 102,871 312,301 1,194,173
Total Cost and Expense 5815 99,610 102,871 312,301 1,194,173
Income (Loss) from operations (5,815) (95,235) (101,746) (304,187) (428,176)
Other Income:
Interest and other 0 0 0 12 2,493
Extraordinary item
Gain on extinguishment of debt 684,973 0 747,103 0 747,103
Income (taxes) benefit - - -
Net Income (Loss) 679,157 (95,235) (645,357) (304,187) (428,176)
Income (Loss) per
common share (basic
and assuming dilution) 0.13 (0.02) 0.12 (0.06) (0.08)
Weighted average
shares outstanding
Basic and Diluted 5,368,000 5,368,000 5,368,000 5,368,000 4,876,755
See accompanying notes to the unaudited condensed financial information
SEAWRIGHT HOLDINGS
Formerly PRE-SETTLEMENT FUNDING CORPORATION
(A Development Stage Company)
STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD OCTOBER 14, 1999 (Date of Inception) TO SEPTEMBER 30, 2003
( UNAUDITED )
Common Stock Additional Deficit
Shares Amount Paid In Accumulated
Capital during
Development
Stage Total
Net loss - $ - $ - $ (1,291) $ (1,291)
Balance at December 31, 1999 - - - (1,291) (1,291)
Common stock issued on
September 30, 2000 in
exchange for convertible debt at
$.50 per share 78,000 78 38,922 - 39,000
Common stock issued on
November 27, 2000 in
exchange for convertible debt at
$.50 per share 26,000 26 12,974 - 13,000
Net loss at December 31, 2000 - - - (157,734) (157,734)
Balance at December 31, 2000 104,000 104 51,896 (159,025) (107,025)
Common stock issued on
January 1, 2001 in
exchange for convertible debt at
$.50 per share 174,000 174 86,826 - 87,000
Common stock issued on
January 2, 2001 to
founders in exchange
for services valued at
$ .001 per share 5,000,000 5,000 20 - 5,020
Common stock issued on
January 2, 2001 in
exchange for services
at $.50 per share 90,000 90 44,910 - 45,000
Net Loss at December 31, 2001 - - - (556,921) (556,921)
Balance at December 31, 2001 5,368,000 5,368 183,652 (715,946) (526,926)
Net Loss at December 31,2002 - - - (357,588) (357,588)
Balance at December 31, 2002 5,368,000 5,368 183,652 (1,073,534) (884,514)
Net surplus for the
nine months ended
September 30, 2003 - - - 645,357 645,357
Balance at September 30, 2003 5,368,000 5,368 183,652 (428,176) (239,156)
SEAWRIGHT HOLDINGS, INC.
FORMERLY PRE-SETTLEMENT FUNDING CORPORATION
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The period
October 14, 1999
(Date of Inception)
For The Nine Months through
Ended September 30
September 30 2003
2003 2002
Net cash from operating activities (6,433) (21,059) (240,651)
Cash flows from investing activities - - -
Net cash from financing activities 50,000 20,333 284,236
Net increase (decrease) in cash and equivalents 43,567 (726) 43,585
Cash and cash equivalents at beginning of period 18 1,003 -
Cash and cash equivalents at end of period 43,585 277 43,585
Supplemental Information:
Cash paid during the period for interest - - -
Cash paid during the period for taxes - - -
Common Stock issued in exchange for capital notes - - 139,000
Common Stock issued to founders in exchange for services - - 5,020
Common Stock issued in exchange for Services - - 45,000
See accompanying notes to unaudited condensed financial information
SEAWRIGHT HOLDINGS, INC.
FORMERLY PRE-SETTLEMENT FUNDING CORPORATION
(A Development Stage Company)
Notes to Financial Statements
( Unaudited )
NOTE A-SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and
with the instructions to Form 10QSB. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments ( consisting of normal
recurring accruals ) considered necessary for a fair presentation
have been included. Accordingly, the results from operations for the
three months period ended September 30, 2003, are not necessarily
indicative of the results that may expected for the year ending
December 31, 2003. The unaudited condensed financial statements
should be read in conjunction with the December 31, 2002 financial
statements and footnotes thereto included in the Company's SEC Form 10 QSB.
Business and Basis of Presentation
SEAWRIGHT HOLDINGS, Inc. formerly Pre-Settlement Funding Corporation
("Company") was formed on October 14, 1999 under the laws of the
state of Delaware. The name change from Pre- Settlement Funding
Corporation took place September 26th, 2003. The Company is a
development stage enterprise, as defined by Statement of Financial
Accounting Standards No. 7 ("SFAS No. 7"). The company's initial
business was seeking to provide financing to plaintiffs who are
involved in personal injury claims. From its inception through the
date of these financial statements the Company has recognized limited
revenues and has incurred significant operating expenses. As of the
previous quarter the personal injury settlement business is
discontinued and the company is pursuing alternative business
opportunities. Consequently, its operations are subject to all risks
inherent in the establishment of a new business enterprise. For the
period from inception through September 30, 2003, the Company has
accumulated losses of $428,176. During the quarter ended September
30, 2003 the Company took actions involving acquiring property,
enabling it to enter a business which involves spring water bottling and sale.
The sale was completed in October 2003.
The property acquired is known as Seawright Springs, located in Mt
Sidney in the Shenandoah Valley area of Virginia. The spring has a
flow in excess of 1 million gallons of water daily. The company is in
the business of selling its spring water to other bottlers and may
enter into co-packaging arrangements whereby other bottlers will bottle
Seawright Springs water under its name or under private labeling
agreements with other retailers or distributors.
New Accounting Pronouncements
Effective January 1, 2002, the Company adopted SFAS No.142. Under the
new rules, the Company will no longer amortize goodwill and other
intangible assets with definitive lives, but such assets will be
subject to periodic testing for impairment. On an annual basis, and
when there is reason to suspect that their values have been diminished
or impaired, these assets must be tested for impairment, and write
downs to be included in results from operations may be necessary.
SFAS No.142 also requires the Company to complete a transitional goodwill
impairment test six months from the date of adoption. Any goodwill
impairment loss recognized as a result of the transitional goodwill
impairment test is recorded as a cumulative effect of a change in
accounting principle. The adoption of SFAS 142 had no material impact
on the Company's condensed financial statements.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated
asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived
assets. SFAS No. 143 is effective in fiscal years beginning after
June 15, 2002, with early adoption permitted. The Company expects that the
provisions of SFAS No. 143 will not have a material impact on its
consolidated results of operations and financial position upon
adoption. The Company plans to adopt SFAS No. 143 effective January
1, 2003.
SFAS No. 144 establishes a single accounting model for the impairment
or disposal of long-lived assets, including discontinued operations.
SFAS No. 144 superseded Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS No. 121), and APB Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144
had no material impact on Company's consolidated financial statements.
In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This Statement rescinds FASB Statement No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", and an
amendment of that Statement, FASB Statement No. 64, "Extinguishments
of Debt Made to Satisfy Sinking-Fund Requirements" and FASB Statement
No. 44, "Accounting for Intangible Assets of Motor Carriers". This
Statement amends FASB Statement No. 13, "Accounting for Leases", to
eliminate an inconsistency between the required accounting for sale-
leaseback transactions and the required accounting for certain lease
modifications that have economic effects that a similar to sale-
leaseback transactions. The Company does not expect the adoption to
have a material impact to the Company's financial position or results
of operations.
In June 2002, the FASB issued Statement No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." This Statement
Addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." The provisions of this
Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged.
The Company does not expect the adoption to have a material impact to
the Company's financial position or results of operations.
In May 2003, the FASB issued SFAS no. 150 "Accounting for Certain Instruments
with Characteristics of both Liabilities and Equity" or SFAS No. 150, which
establishes standards for how companies classify and measure certain financial
instruments with characteristics of both liabilities and equity. It requires
companies to classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). SFAS No. 150 is effective
beginning with the second quarter of fiscal 2004. The Company does not believe
the adoption of SFAS No 150 will have a material future impact on its financial
statements.
In October 2002, the FASB issued Statement No. 147, "Acquisitions of
Certain Financial Institutions-an amendment of FASB Statements No. 72
and 144 and FASB Interpretation No. 9", which removes acquisitions of
financial institutions from the scope of both Statement 72 and
Interpretation 9 and requires that those transactions be accounted for
in accordance with Statements No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets. In addition, this
Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, to include in its scope long-term customer
relationship intangible assets of financial institutions such as
depositor- and borrower-relationship intangible assets and credit
cardholder intangible assets. The requirements relating to
acquisitions of financial institutions are effective for acquisitions
for which the date of acquisition is on or after October 1, 2002. The
provisions related to accounting for the impairment or disposal of
certain long-term customer-relationship intangible assets are
effective on October 1, 2002. The adoption of this Statement did not
have a material impact to the Company's financial position or results
of operations as the Company has not engaged in either of these activities.
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure", which amends
FASB Statement No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The transition guidance and annual
disclosure provisions of Statement 148 are effective for fiscal years
ending after December 15, 2002, with earlier application permitted in
certain circumstances. The interim disclosure provisions are
effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002. The adoption of this
statement did not have a material impact on the Company's financial
position or results of operations as the Company has not elected to
change to the fair value based method of accounting for stock-based
employee compensation.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities." Interpretation 46 changes the
criteria by which one company includes another entity in its consolidated
financial statements. Previously, the criteria were based on control
through voting interest. Interpretation 46 requires a variable
interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's
residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to
variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first
fiscal year or interim period beginning after June 15, 2003. Certain of the
disclosure requirements apply in all financial statements issued
after January 31, 2003, regardless of when the variable interest entity was
established. The Company does not expect the adoption to have a
material impact to the Company's financial position or results of operations.
In April 2003, the FASB issued Statement No.149, " Amendment of
Statement of 133 on Derivative Instruments and Hedging Activities".
Which amends Statement 133, Accounting for Derivative Instruments and
Hedging Activites. The adoption of this statement did not have a
material impact on the Company's financial position.
In May 2003, the FASB issued Statement No. 150, " Accounting for
certain Financial Instruments with Characteristics of both
Liabilities and Equity. The adoption of this statement did not have a
material impact on the Company's financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATIONS.
When used in this Form 10-QSB and in our future filings with the
Securities and Exchange Commission, the words or phrases will likely
result, management expects, or we expect, will continue, is
anticipated, estimated or similar expressions are intended to
identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are cautioned not
to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. These statements are
subject to risks and uncertainties, some of which are described below.
Actual results may differ materially from historical earnings and those
presently anticipated or projected. We have no obligation to publicly
release the result of any revisions that may be made to any forward-
looking statements to reflect anticipated events or circumstances
occurring after the date of such statements.
The following discussion contains forward-looking statements that are
subject to significant risks and uncertainties about us, our current
and planned products, our current and proposed marketing and sales,
and our projected results of operations. There are several important
factors that could cause actual results to differ materially from
historical results and percentages and results anticipated by the
forward-looking statements. We have sought to identify the most
significant risks to its business, but cannot predict whether or to
what extent any of such risks may be realized nor can there be any
assurance that we have identified all possible risks that might
arise. Investors should carefully consider all of such risks before
making an investment decision with respect to our stock. The
following discussion and analysis should be read in conjunction with
the financial statements of our Company and notes thereto. This
discussion should not be construed to imply that the results
discussed herein will necessarily continue into the future, or that
any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents
only the best present assessment from our Management.
Plan of Operation
Seawright Holdings Inc., formerly Pre-settlement Funding Corp, is
still in the development stage and has earned only a small amount of
revenue, approximately $16,000, from its previous operations
involving funding of 40 personal injury cases. Due to the down turn
in the financial markets and consequent lack of outside investment
interest in the business of advancing cash to plaintiffs involved in
personal injury claims, as well as to plaintiffs involved in other
types of claims such as divorce cases, we are not seeking to continue
this business line.
During the next twelve months, to the extent it is feasible and
profitable, we intend to develop other business interests and
investment opportunities, which are not related to the litigation
funding business. The further development of the other businesses may
include, but may not be limited to, developing marketing materials,
renting additional office space, and interviewing and hiring
administrative, and marketing personnel. Also, where appropriate we
will seek outside financing for new activities in the forms of loans
and equity investment. In the quarter ending September 30, 2003 we
made arrangements to enter a business involving the sale of bulk
spring water. In the quarter we negotiated agreements to purchase a
property with a suitable source of water for the sum of $1 million.
The property acquisition and related loan agreements were completed
in October 2003. We intend to identify customers and begin selling
water within the year.
As part of our reorganization of our business and to better reflect
our current activities and plan of operations, the company name was
changed from Pre-Settlement Funding Corporation to Seawright
Holdings, Inc. Darryl Reed resigned as President and is no longer
involved in our business and Joel P Sens, our principal shareholder
assumed the office of President and Chief Executive Officer.
We may experience fluctuations in operating results in future periods
due to a variety of factors including, but not limited to, market
acceptance of our services, our ability to obtain additional
financing in a timely manner and on terms favorable to us, our
ability to successfully integrate prospective asset acquisitions to
our existing business operation, delays or errors in our ability to
upgrade and develop our systems and infrastructure in a timely and
effective manner, technical difficulties, system downtime or utility
brownouts, our ability to attract customers at a steady rate and
maintain customer satisfaction, seasonality of advertising sales, the
amount and timing of operating costs and capital expenditures
relating to the expansion of our business, operations and
infrastructure and the implementation of marketing programs, key
agreements and strategic alliances, the number of products offered or
type of investment entered into.
For the period from our inception through September 30, 2003, we
have:
- Formed our company and established our initial structure
- Entered the market for litigation funding services and decided
to discontinue that business.
- Issued cash advances to 40 clients
- Settled and received proceeds with respect to 29 cases
- We remain focused on pursuing collection on the outstanding 11
cases where advances to plaintiffs are still outstanding. We know
of no reason with respect to these cases why they should not be
collected. Some revenue may still result from the litigation
funding line of business as a result.
- We have reorganized our company and investigated other business
opportunities including the market for spring water and the
associated costs of production.
- We have identified and contracted to purchase a property,
called Seawright Springs capable of producing 1 million gallons
per day of water.
- We have identified and obtained sources of funding to cover
initial purchase costs for the Seawright Springs.
Comparison of Financial Results
Three Months and Nine Months Ended September 30, 2003 versus Three
and Nine Months Ended September 30, 2002 and
Revenues
Revenue represents the net proceeds to from the settlement of cases.
We have generated revenues of approximately $16,400 from the now
discontinued operations of litigation funding from the inception of
our business. During the quarter ended September 30, 2003, we have
generated $0 revenue from monetary settlements, as compared to $4375
in revenue for the quarter ended September 30, 2002. In the nine
months ended September 30, 2003 we generated $1,125 in revenue
compared to $8,102 in the nine months ending September 30, 2002. We
began advancing funds to personal injury plaintiffs in February 2001.
We began recognizing revenues from the realization and receipt of
monetary settlements related to the settlement of these specific
litigation claims during the last six months of 2001. In the nine
months ending September 30, 2003 no advances were made due to the
discontinuance of the business line, but 3 cases were settled with a
value of $2,625. The margin achieved on net settlements, of 42% -45%,
has remained relatively constant.
Costs and Expenses
From our inception through September 30, 2003, we have incurred
expenses of $1,194,173 $747,103 of these expenses were cancelled in
agreements made during the nine month period ended September 30,
2003. The expenses incurred were associated principally with stock
issuances to our founders, legal, consulting and accounting fees and
costs in connection with the development of our business plan, market
research, and the preparation of our registration statement as well
as the accrual of salary to our director. In the quarter ended
September 30, 2003 expenses of $5,815 were incurred in connection
with the administration of our business and represent accounting,
legal and accommodation expenses. This compares with expenses of
$99,610 recorded in the quarter to September 30, 2002, which includes
salary accruals. The expense for the nine months ended September 30,
2003 was $102,871, and includes accrual of salary for the director
and legal and accounting fees.. In the nine months ending September
30, 2002 expenses of $312,301 were recorded including legal and
accounting fees and accrued salaries.
Gain on Extinguishment of Debt
During the nine months ended September 30, 2003 we settled on
previous recorded liabilities resulting in a gain on extinguishment
of debt totaling $747,103. The largest component was generated
principally due to the agreement of our directors to give up claims
to all but $90,000, due to Joel P Sens, of unpaid earned salary
totaling $630,000, and the reversal of accrued employer tax costs of
approximately $30,000 related to that accrued salary. Additionally, a
$89,358 reduction in previously accrued or billed legal fees was
agreed. This was offset by an agreement to cancel amounts owed by
director Darryl Reed of approximately $3000.
Liquidity and Capital Resources
As of September 30, 2003, we had a working capital deficit of
$189,156. As a result of our operating losses from our inception
through September 30, 2003, we generated a cash flow deficit of
$240,651 from operating activities. We met our cash requirements
during the nine months ended September 30, 2003 through approximately
$80,000 in advances from our principal shareholder and a receipt of
$50,000 for preferred shares described below. Our accounts payable,
which was composed predominantly of liabilities to our accountants
and lawyers in connection with our registration statement, was
reduced by $128,698 during the nine months ended September 30, 2003
to $25,290 at September 30, 2003. The reductions were the result of
payments made by our principal shareholder of some $66,000 on behalf
of the company and settlements of approximately $65,000. In
agreements made during the quarter ended September 30 2003,
approximately $690,000 of payroll liability was eradicated from the
books. This represents all the salary and related employer taxes
accrued but unpaid for Darryl Reed, our former President, who
resigned September 23rd, 2003 and all but $90,000 due to Joel Sens.
Accrued payroll, representing liabilities to our remaining employee,
now stands at $ 96,750 at September 30, 2003. Accrued liabilities now
stands at $4,095 at September 30, 2003 after the balance due for
legal fees was reduced by $24,000 by agreement in July 2003 and a
further $20,000 was paid by the director and major shareholder Joel Sens.
While we have raised the capital necessary to meet our working
capital
and financing needs in the past, additional financing is required if
we are to grow alternative business interests and fund the
transactions and business we have currently contracted for.
Purchase of Seawright Springs
In October 2003, we took title to the property known as Seawright
Springs in Mt Sidney, Virginia for $1 million and a $50,000
assignment fee. Stafford Street Capital LLC, a business entirely
owned by our principal shareholder Joel P Sens, contracted to
purchase the property in June, 2003 and assigned all its interests in
the contract in October 2003 to Seawright Springs LLC, an entity
wholly owned by Seawright Holdings Inc. $300,000 was immediately due
on settlement, with a further $700,000 subject to a Promissory Note
carrying a rate of 6% per annum. Under the terms of the note,
$100,000 plus interest will be due in April 2004 and $200,000 plus
interest will be due in October 2004. $162,500 plus interest will be
due in October 2006 and the remaining principal of $237,500 and
interest will be due in October 2008, the fifth anniversary of the
acquisition. A note will be issued in respect of the $50,000 assignor
fee to Stafford Street Capital. A further Promissory Note was issued
in October 2003 to Joel P Sens, for $65,000 with interest accruing at
a rate of 10% per annum and payable in October 2004. Proceeds from
the Joel Sens note and the Series A Convertible Preferred Stock
described below were used to meet the immediate liability under the
purchase agreement for Seawright Springs.
Series A Convertible Preferred Stock
During the period $50,000 of Series A Convertible Preferred Stock
proceeds were received in respect of 10,000 shares. In October 2003,
a further $200,000 Series A Convertible Preferred shares were issued
and proceeds received. In total 60,000 shares were dedicated for the
Series A with a par value of $0.001 and sale price of $5 per share,
of which 50,000 have been sold to date. The shares are convertible
into common stock at the option of the holder at a ratio of 10 Common
Stock for each preferred share if converted before the first
anniversary of the original issue date and at a ratio of 5 Common
Stock for each Preferred Share if conversion is made after the first
anniversary but before the second anniversary. The preferred series
may be redeemed for cash at the option of the company, any time after
the first anniversary of the original issue date but before the
second anniversary. The preferred shareholders shall be entitled to
cumulative dividends when, as and if declared by the board at a per
share rate of 10% per annum of the original issue price. At the
option of the preference shareholder, accrued and unpaid cumulative
dividends may be applied to the purchase of additional shares of
Common Stock upon conversion of the Preferred Stock to Common Stock.
In event of a liquidation of our company the Preferred Stock ranks
higher than the Common Stock in determining the distribution of
assets and surplus funds.
There are no assurances we will be successful in raising the funds
required to operate our business. Within the next year further funds
will be needed to meet our obligations under the purchase agreement
for the Seawright Springs property as described above, and to fund
improvements to that property and its initial operations.
While we develop our new business strategy and seek further funding
we plan to use our existing capital resources and collection of
receivables from the discontinued litigation funding business to fund
our current level of operating activities.
If we are not successful in generating sufficient liquidity from
operations or in raising sufficient capital resources, on terms
acceptable to us, this could have a material adverse effect on our
business, results of operations liquidity and financial condition.
Our independent certified public accountants have stated in their
report included in our December 31, 2002 Form 10-KSB, that we have
incurred operating losses since its inception, and that we are
dependent upon management's ability to develop profitable operations.
These factors among others may raise substantial doubt about our
ability to continue as a going concern.
Product Research and Development
We do anticipate reviewing other lines of investment and business.
Acquisition or Disposition of Plant and Equipment
We do not anticipate the sale of any significant property, plant or
equipment during the next twelve months. We anticipate the
acquisition of plant and equipment and other improvements for the
Seawright Spring. We will need to raise additional funds to meet
these acquisition needs.
Number of Employees
As of September 30, 2003, we have one employee. In order for us to
attract and retain quality personnel, we anticipate we will have to
offer competitive salaries to future employees. Any future increase
in personnel will depend upon the line of business or investment
entered into and the availability of funding for those operations.
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant
risks to its business as discussed in "Risk Factors" above, but
cannot predict whether or to what extent any of such risks may be realized
nor can there be any assurances that we have identified all possible
risks that might arise. Investors should carefully consider all of
such risk factors before making an investment decision with respect to
our stock.
Limited operating history; anticipated losses; uncertainly of future results
We have only a limited operating history upon which an evaluation of
our business and its prospects can be based. Our prospects must be
evaluated with a view to the risks encountered by a company in an
early stage of development, particularly in light of the
uncertainties relating to our future operations and line of business and
investment.
Potential fluctuations in quarterly operating results
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, most of which are outside
our control, including: seasonal trends in demand;
the amount and timing of capital expenditures and other costs relating
to the expansion of our operations; the introduction of new services
and products by us or our competitors; price competition or pricing changes in
the industry; technical difficulties; general economic conditions, and economic
conditions specific to the Spring water market. Our quarterly results may
also be significantly affected by the impact of the accounting
treatment of acquisitions, financing transactions or other matters.
Particularly at our early stage of development, such accounting
treatment can have a material impact on the results for any quarter.
Due to the foregoing factors, among others, it is likely that our
operating results will fall below our expectations or investors'
expectations in some future quarter.
Management of Growth
Our future success will be highly dependent upon our ability to
successfully manage the expansion of our operations. Our ability to
manage and support our growth effectively will be substantially
dependent on our ability to implement adequate financial and
management controls, reporting systems, and other procedures and hire
sufficient numbers of financial, accounting, administrative, and
management personnel. We are in the process of establishing and
upgrading our financial accounting and procedures. There can be no
assurance that we will be able to identify, attract, and retain
experienced accounting and financial personnel. Our future operating
results will depend on the ability of our management and other key
employees to implement and improve our systems for operations,
financial control, and information management, and to recruit, train,
and manage its employee base. There can be no assurance that we will
be able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse
effect on our business, results of operations, and financial condition.
Our future success depends upon our ability to address potential
market opportunities while managing our expenses to match our ability
to finance our operations. This need to manage our expenses will
place a significant strain on our management and operational
resources. If we are unable to manage our expenses effectively, our
business, results of operations, and financial condition will be
materially adversely affected.
Risks associated with acquisitions
As part of our business strategy in the future, we could acquire
assets and businesses relating to or complementary to our operations.
Any acquisitions would involve risks commonly encountered in acquisitions
of companies. These risks would include, among other things, the
following: we could be exposed to unknown liabilities of the
acquired companies; we could incur acquisition costs and expenses
higher than it anticipated; fluctuations in our quarterly and annual
operating results could occur due to the costs and expenses of
acquiring and integrating new businesses or technologies; we could
experience difficulties and expenses in assimilating the operations
and personnel of the acquired businesses; our ongoing business could
be disrupted and its management's time and attention diverted; we
could be unable to integrate successfully.
The foregoing Managements Discussion and Analysis of Financial
Condition and Results of Operations "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933, as
amended, and Rule 3b-6 under the Securities Act of 1934, as amended,
including statements regarding, among other items, the Company's
business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the
industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-looking
statements are based largely on the Company's expectations and are
subject to a number of risks and uncertainties, including but not
limited to, those risks associated with economic conditions generally
and the economy in those areas where the Company has or expects to
have assets and operations; competitive and other factors affecting
the Company's operations, markets, products and services; those risks
associated with the Company's ability to successfully negotiate with
certain customers, risks relating to estimated contract costs,
estimated losses on uncompleted contracts and estimates regarding the
percentage of completion of contracts, associated costs arising out of
the Company's activities and the matters discussed in this report;
risks relating to changes in interest rates and in the availability,
cost and terms of financing; risks related to the performance of
financial markets; risks related to changes in domestic laws,
regulations and taxes; risks related to changes in business strategy
or development plans; risks associated with future profitability; and
other factors discussed elsewhere in this report and in documents
filed by the Company with the Securities and Exchange Commission. Many
of these factors are beyond the Company's control. Actual results
could differ materially from these forward-looking statements. In
light of these risks and uncertainties, there can be no assurance that
the forward-looking information contained in this Form 10-QSB will, in
fact, occur. The Company does not undertake any obligation to revise
these forward-looking statements to reflect future events or
circumstances and other factors discussed elsewhere in this report and
the documents filed or to be filed by the Company with the Securities
and Exchange Commission.
ITEM 3. CONTROLS AND PROCEDURES
The Company's management including the President and Treasurer, have
evaluated, within 90 days prior to the filing of this quarterly
report, the effectiveness of the design, maintenance and operation of
the Company's disclosure controls and procedures. Management
determined that the Company's disclosure controls and procedures were
effective in ensuring that the information required to be disclosed by
the Company in the reports that it files under the Exchange Act is
accurate and is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and regulations.
Disclosure controls and procedures, no matter how well designed and
implemented, can provide only reasonable assurance of achieving an
entity's disclosure objectives. The likelihood of achieving such
objectives is affected by limitations inherent in disclosure controls
and procedures. These include the fact that human judgment in decision
making can be fully faulty and that breakdowns in internal control can
occur because of human failures such as errors or mistakes or
intentional circumvention of the established process.
There have been no significant changes in internal controls or in
other factors that could significantly affect these controls
subsequent to the date of the evaluation thereof, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Other than as set forth below, the Company is not a party to any
material pending legal proceedings and, to the best of its knowledge,
no such action by or against the Company has been threatened.
The Company is subject to other legal proceedings and claims that
arise in the ordinary course of its business. Although occasional
adverse decisions or settlements may occur, the Company believes that
the final disposition of such matters will not have material adverse
effect on its financial position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES.
Sales of Unregistered Securities.
The Registrant had no sales of unregistered securities during the
the three month period ending September 30, 2003.
Use of Proceeds.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were not any matters submitted requiring a vote of security
holders during the three-month period ending September 30, 2003.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. No reports on Form 8-K were filed
during the three-month period covered in this Form 10-QSB.
(b) Exhibits. There have not been any documents that are to be
attached as Exhibits entered into during the three-month period
covered in this Form 10-QSB other than those as provided below and
therefore, all Exhibits have been previously filed by the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Seawright Holdings, Inc.
Dated: By: /s/ Joel Sens, President/Treasurer
Exhibit
99.1 Certification pursuant of President to 18 U.S.C. Section 1350,
as adopted to Section 906 of the Sarbanes Oxley Act of 2002.
99.2 Certification pursuant of Treasurer to 18 U.S.C. Section 1350,
as adopted to Section 906 of the Sarbanes Oxley Act of 2002.
CERTIFICATIONS
I, Joel Sens, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Seawright Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14 for the
registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions, with regard to
significant deficiencies and material weaknesses.
Date: November 13, 2003
/s/ Joel Sens
Joel Sens, President/Treasurer
Exhibit 99.1
In connection with the Quarterly Report of Seawright Holdings, Inc.
(the "Company") on Form 10-QSB for the period ending September
30, 2003 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Joel Sens, President, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents, in all
material aspects, the financial condition and result of operations on
the Company.
By: /s/ Joel Sens, President
Exhibit 99.2
In connection with the Quarterly Report of Seawright Holdings, Inc.
"Company") on Form 10-QSB for the period ending September 30, 2003,
as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Joel Sens, Treasurer, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act, that:
(1) The Report fully complies with Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The Information contained in the Report fairly represents, in all
material aspects, the financial condition and result of operations on
the Company.
By: /s/ Joel Sens
Joel Sens, Treasurer