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 JUNE
30, 2004
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
(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 5,828,000 shares of its
common stock outstanding as of June 30, 2004.
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
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
Condensed Consolidated Balance Sheets at June 30, 2004 and December
31, 2003
Condensed Consolidated Statement of Losses
For The Three and Six Months Ended June 30, 2004 and 2003
and The Period October 14, 1999 (Date of Inception) Through June 30, 2004
Condensed Consolidated Statement of Deficiency in Stockholders' Equity
For The Period October 14, 1999 (Date of Inception) Through June 30, 2004
Condensed Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2004 and 2003
and The Period October 14, 1999 (Date of Inception) Through June 30, 2004
Notes to Unaudited Condensed Consolidated Financial Information
June 30, 2004
SEAWRIGHT HOLDINGS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
June 30, 2004 December 31, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalent $ 411 $ -
Total current assets 411 -
Property and equipment:
Land 1,000,000 1,000,000
Equipment 583 -
Building improvement 6,780 6,780
Total property and equipment 1,007,363 1,006,780
Other assets:
Discontinued operations, claimed
receivable, net of allowance of $0 6,000 6,000
Total Assets 1,013,774 1,012,780
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash disbursed in excess of
available funds - 24,688
Accounts payable and accrued liabilities 168,009 148,548
Accrued dividend 12,500 -
Note payable, current portion 315,000 415,000
Shareholder advances 213,753 121,936
Total current liabilities 709,262 710,172
Note payable, long-term portion 400,000 400,000
COMMITMENTS AND CONTINGENCIES - -
(DEFICIENCY IN) STOCKHOLDERS' EQUITY
Preferred stock, par value $.001
per share; 100,000 shares authorized:
Series A preferred stock, 60,000
shares authorized, 50,000 and
55,000 shares issued and
outstanding at June 30, 2004 and
December 31, 2003, respectively. 50 55
Common stock, par value $.001
per share; 19,900,000 shares
authorized; 5,828,000 and
5,368,000 shares issued and
outstanding at June 30, 2004 and
December 31, 2003, respectively 5,828 5,368
Additional paid-in-capital 605,918 463,873
Accumulated deficit during
development stage (707,284) (566,688)
(Deficiency in) stockholders' equity (95,488) (97,392)
Total liabilities and
(deficiency in) stockholders' equity 1,013,774 1,012,780
See accompanying notes to unaudited condensed consolidated financial
information
SEAWRIGHT HOLDINGS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
Costs and expenses:
Selling, general and administrative $ 59,489 $ 14,725 $ 105,879 $ 34,925 $ 1,421,788
Total operating expense 59,489 14,725 105,879 34,925 1,421,788
Loss from operations (59,489) (14,725) (105,879) (34,925) (1,421,788)
Other income (expenses):
Extinguishment of debt - - - - 747,103
Interest income (expenses) (17,714) - (34,717) - (49,500)
Total other income (expenses) (17,714) - (34,717) - 697,603
(Loss) from continuing
operations, before income taxes and
discontinued operations (77,203) (14,725) (140,596) (34,925) (724,185)
Provision for income tax - - - - -
(Loss) from continuing
operations, before discontinued
operations (77,203) (14,725) (140,596) (34,925) (724,185)
Income from discontinued
operations - - - 1,125 16,901
Net (loss) (77,203) (14,725) (140,596) (33,800) (707,284)
Cumulative convertible
preferred stock dividend
requirements (12,500) - (12,500) - (12,500)
Net (loss) attributable to
common shareholders (89,703) (14,725) (153,096) (33,800) (719,784)
Losses per common
share (basic and
assuming dilution) (0.02) (0.00) (0.03) (0.01)
Continuing operations (0.02) (0.00) (0.03) (0.01)
Discontinued operations - - - 0.00
Weighted average common shares
outstanding 5,724,652 5,368,000 5,580,308 5,368,000
See accompanying notes to unaudited condensed consolidated financial
information
SEAWRIGHT HOLDINGS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD OCTOBER 14, 1999 (DATE OF INCEPTION) TO JUNE 30, 2004
Preferred Preferred Common Common Add'l Deficit Total
Shares Shares Shares Shares Paid In Accumulated Net loss
Amount Amount Capital during
Dev Stage
- $ - - $ - $ - $ (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 - - - - - (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 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 - - - - - (556,921) (556,921)
Balance at
December 31, 2001 - - 5,368,000 5,368 183,652 (715,946) (526,926)
Net Loss - - - - - (357,588) (357,588)
Balance at
December 31,2002 - - 5,368,000 5,368 183,652 (1,073,534) (884,514)
Stock options issued in
exchange for services - - - - 5,276 - 5,276
Preferred stock issued in
exchange for cash at $5 per
share 55,000 55 - - 274,945 - 275,000
Net income - - - - - 506,846 506,846
Balance at
December 31, 2003 55,000 55 5,368,000 5,368 463,873 (566,688) (97,392)
Common stock issued
on April 8, 2004 in
exchange for stock
options exercised at
$.5625 per share - - 160,000 160 89,840 - 90,000
Preferred stock
canceled in
exchange for stock options
exercised (5,000) (5) - - (24,995) - (25,000)
Common stock issued on
April 8, 2004 in exchange
for cash at $.30 per share,
net of costs and fees - - 300,000 300 89,700 - 90,000
Preferred stock dividend
Accrual - - - - (12,500) - (12,500)
Net loss - - - - - (140,596) (140,596)
Balance at
June 30, 2004 50,000 50 5,828,000 5,828 605,918 (707,284) (95,488)
See accompanying notes to unaudited condensed consolidated financial
information
SEAWRIGHT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months For the period from
ended June 30, October 19, 1999
(date of inception)
through
2004 2003 June 30, 2004
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period from
continuing operations $ (140,596) $ (34,925) $ (724,185)
Adjustments to reconcile net
loss to net cash used for
operating activities:
Income from discontinued operations - 1,125 16,901
Extinguishment of debt - - (747,103)
Common stock issued to founders - - 5,020
Common stock issued in
exchange for services rendered - - 45,000
Stock options issued in
exchange for services rendered - - 5,276
Common stock issued in
exchange for financing costs 1,500 - 1,500
Changes in assets and liabilities:
Claims receivable - - (6,000)
Cash disbursed in excess of available fund (24,688) - -
Accounts payable and accrued liabilities 19,461 (32,535) 915,111
NET CASH (USED IN) OPERATING ACTIVITIES (144,323) (66,335) (488,480)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (100,583) - (407,363)
NET CASH (USED IN) INVESTING ACTIVITIES (100,583) - (407,363)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of capital notes, net - - 139,000
Proceeds from notes payable - - 115,000
Proceeds from issuance of
common stock, net of costs and fees 153,500 - 153,500
Proceeds from issuance of
preferred stock, net of costs and fees - - 275,000
Proceeds from shareholder advances,
net of repayments 91,817 66,347 213,754
NET CASH PROVIDED BY FINANCING ACTIVITIES 245,317 66,347 896,254
NET (DECREASE) IN CASH AND EQUIVALENTS 411 12 411
Cash and cash equivalents at
the beginning of the period - 18 -
Cash and cash equivalents at
the end of the period 411 30 411
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest - - -
Income taxes paid - - -
Notes payable issued in
connection with acquisition of land - - 700,000
Repayment of notes payable
issued in connection with
acquisition of land (100,000) - (100,000)
Common stock issued to founders - - 5,020
Common stock issued for services - - 45,000
Stock options issued in
exchange for services rendered - - 5,276
Preferred stock canceled in
connection with purchase of
common stock 25,000 - 25,000
See accompanying notes to unaudited condensed consolidated financial
information
SEAWRIGHT HOLDINGS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2004
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 six-
months period ended June 30, 2004, are not necessarily indicative of
the results that may expected for the year ending December 31, 2004.
The unaudited condensed financial statements should be read in
conjunction with the December 31, 2003 financial statements and
footnotes thereto included in the Company's SEC Form 10 KSB.
Business and Basis of Presentation
Seawright Holdings, Inc. (the "Company") was formed on October 14,
1999 under the laws of the state of Delaware. The Company is a
development stage enterprise, as defined by Statement of Financial
Accounting Standards No. 7 ("SFAS No. 7") and is seeking to
development of spring water bottling and distribution business. From
its inception through the date of these financial statements the
Company has recognized no revenues and has incurred significant
operating expenses. Consequently, its operations are subject to all
risks inherent in the establishment of a new business enterprise. For
the period from inception through June 30, 2004, the Company has
accumulated losses of $707,284.
The consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiary, Seawright Springs LLC.
Significant intercompany transactions have been eliminated in
consolidation.
Discontinued Operations
As a result of the Company's acquisition of real property and
improvements in October 2003, the Company restructured its operations
to focus on the development of the spring water bottling and
distribution business. This restructuring included the discontinuance
of financing plaintiffs who are involved in personal injury claims.
Accordingly, the Company's plaintiff's financing business segment is
accounted for as a discontinued operation, and the amounts in the
financial statements and related notes for all periods shown have
been restated to reflect discontinued operations accounting. The
Company has not allocated any previously incurred corporate overhead
and selling, general and administrative expenses to the discontinued
operation.
The financial statements reflect the operating results of the
discontinued operations separately from continuing operations. Prior
years have been restated. Operating results for the discontinued
operations for the following periods were:
Revenues $ - $ - $ - $ 1,125 $ 16,901
Net income before income taxes - - - 1,125 16,901
Provision for income taxes - - - - -
Net income from
discontinued operations - - - 1,125 16,901
Stock Based Compensation
In December 2002, the FASB issued SFAS No. 148, "Accounting for
stock-based Compensation- Transition and Disclosure- an amendment of
SFAS 123." This statement amends SFAS 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 SFAS No.123 to require prominent
disclosures in both annual and interim financial compensation and the
effect of the method used on reported results. The company has chosen
to continue to account for stock-based compensation using the
intrinsic value method prescribed in APB Opinion No.25 and related
interpretations. Accordingly, compensation expense for stock options
is measured as the excess, if any, of the fair market value of the
Company's stock at the date of the grant over the exercise price of
the related option. The Company has adopted the annual disclosure
provisions of SFAS No.148 in its financial reports for the year ended
December 31, 2003 and will adopt the interim disclosure provisions
for its financial reports for the subsequent periods.
Had compensation costs for the Company's stock options been
determined based on the fair value at the grant dates for the awards,
the Company's net loss and losses per share would have been as follows:
Net income (loss) - as reported $ (77,203) $ (14,725) $ (140,596) $ (33,800)
Add: Total stock based employee
compensation expense as reported
under intrinsic value method (APB. No. 25) - - - -
Deduct: Total stock based employee
compensation expense as reported
under fair value based method (SFAS No. 123) - - - -
Net income (loss) - Pro Forma (77,203) (14,725) (140,596) (33,800)
Net income (loss) attributable to
common stockholders - Pro forma (89,703) (14,725) (153,096) (33,800)
Basic (and assuming dilution) earning
(loss) per share - as reported (0.02) (0.00) (0.03) (0.01)
Basic (and assuming dilution) earning
(loss) per share - Pro forma (0.02) (0.00) (0.03) (0.01)
NOTE B - CAPITAL STOCK
The Company was incorporated under the laws of the State of Delaware
on October 14, 1999 under the name of Pre-Settlement Funding
Corporation. The company has authorized 100,000 shares of preferred
stock, with a par value of $.001 per share. The Company has
designated 60,000 of its preferred stock as Series A Convertible
Preferred Stock. As of June 30, 2004 and December 31, 2003, the
Company has 50,000 and 55,000 shares of Series A Convertible
Preferred Stock issued and outstanding, respectively.
The Company has authorized 19,900,000 shares of common stock, with a
par value of $.001 per share. As of June 30, 2004 and December 31,
2003, there are 5,828,000 and5,368,000 shares of common stock issued
and outstanding, respectively.
In March 2000, the Company issued $ 124,000 of notes payable
convertible into common stock at a price equal to $.50 per share. As
of December 31, 2000, the holders of the notes payable elected to
convert $52,000 of the notes, net of costs, in exchange for 104,000
shares of the Company's common stock.
In January 2001, the holders of the $ 72,000 of convertible Notes
Payable, exercised their rights to convert the unpaid principal to
144,000 shares of the Company's common stock at the conversion price
of $.50 per share.
In January 2001, $15,000 of convertible notes payable were issued and
converted to 30,000 shares of the Company's common stock.
In January 2001, the Company issued 5,000,000 shares of its common
stock to the Company's Founders in exchange for services provided to
the Company from its inception. The Company valued the shares issued
at $.001 per share, which approximated the fair value of the services
rendered. The compensation costs of $5,020 were charged to income
during the year ended December 31, 2001.
In January 2001, the Company issued 90,000 shares of its common stock
to consultants in exchange for services provided to the Company. The
Company valued the shares issued at $ .50 per share, which
approximated the fair value of the shares issued during the period
the services were rendered. The compensation costs of $ 45,000 were
charged to income during the year ended December 31, 2001.
During the year ended December 31, 2003, the Company authorized the
issuance of 60,000 shares of newly designated Series A Convertible
Preferred stock, with a par value of $0.001 per share. As of
December 31, 2003 the Company issued 55,000 shares of the Series A
Convertible Preferred stock in exchange for $275,000.
The Series A Convertible Preferred shares are convertible into the
Company's common stock at the option of the holder at a ratio of ten
(10) shares of common stock for each share of preferred stock if
converted before the first anniversary of the original issue date and
at a ratio of five (5) shares of common stock for each share of
preferred stock if conversion is made after the first anniversary but
before the second anniversary. The preferred shares 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 Company's Board
of Directors at a per share rate of 10% per annum of the original
issue price. At the option of the preferred shareholders, accrued and
unpaid cumulative dividends may be applied to the purchase of
additional shares of the Company's common stock upon conversion of
the preferred shares to common shares.
The Company has accrued the unpaid $ 12,500 Series A Preferred Stock
dividend to the holders of the Preferred Shares during the period
ended June 30, 2004. The aggregate unpaid Series A Preferred Stock
dividends at June 30, 2004 is $ 12,500
The Preferred Shares rank senior to the common stock. The Preferred
Shares have a liquidation preference of, payment of the original purchase
price of the Preferred Shares plus all accrued or declared but unpaid
dividends on such shares.
In April 2004, the Company issued 160,000 shares of its common stock
to an existing Company shareholder in exchange for previously issued
stock options exercised at $.5625 per share, or a total of $90,000.
In exchange for the shares, the holder of the option paid $63,500
in cash, and tendered 5,000 shares of the Company's previously
issued Series A preferred stock valued at $ 5 per share. The
preferred shares were subsequently canceled by the Company. The
remaining balance of $1,500 was accounted for as financing costs and
was charged to operations during the period ended June 30, 2004.
In April 2004, the Company issued 300,000 shares of its restricted
common stock to an investor in exchange for $90,000 of proceeds, net
of costs and fees.
NOTE C - STOCK OPTIONS
The following table summarizes the changes in options outstanding and
the related prices for the shares of the Company's common stock
issued to the Company employees and consultants. These options were
granted in lieu of cash compensation for services performed.
Options Outstanding Options Exercisable
Weighted Average Weighed Weighted
Number Remaining Average Number Average
Exercise Outstanding Contractual Life Exercise Price Exercisable Exercise Price
(Years)
$ 1.25 1,500,000 0.50 $ 1.25 1,500,000 $ 1.25
$ 0.56 677,500 2.50 $ 0.56 837,500 $ 0.56
2,177,500 $ 1.04 2,337,500 $ 1.04
Transactions involving options issued to employees and consultants
summarized as follows:
Number of Shares Weighted Average
Price Per Share
Outstanding at January 1, 2002 3,020,000 $ 1.25
Granted - -
Exercised - -
Canceled or expired (1,500,000) -
Outstanding at December 31, 2002 1,520,000 1.25
Granted 837,500 0.56
Exercised - -
Canceled or expired (20,000) -
Outstanding at December 31, 2003
2,337,500 $ 1.00
Granted - -
Exercised (160,000) 0.56
Canceled or expired - -
Outstanding at June 30, 2004 2,177,500 $ 1.04
The estimated value of the options granted to consultants during the
year ended December 31, 2003 was determined using the Black-Scholes
option pricing model and the following assumptions: expected term of
3 years, a risk free interest rate of 2.65%, a dividend yield of 0%
and volatility of 60%. The amount of the expense charged to
operations in connection with granting the options was $5,276 during
the year ended December 31, 2003. There were no stock options
granted during the period ended June 30, 2004.
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 our 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
In the previous year ended December 31, 2003 we entered a business
involving the sale of bulk spring water. We purchased a property
with a suitable source of water for the sum of $1 million. We are
still in the development stage and have yet to recognize any income
from this business line. We are currently identifying customers and
plan to begin selling water in the next quarter.
We discontinued our previous operations involving funding of personal
injury cases.
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.
Our business plan is to sell our spring water to other bottlers and
we may enter into co-packing arrangements whereby other bottlers will
bottle Seawright Springs water under private labeling agreements with
other retailers or distributors. Private label bottled water is
Seawright Springs water bottled under another company's brand name.
Selling to the private labeled bottled water market will allow us to
sell our water without the expense of an advertising budget that is
required to establish brand recognition and market identity.
In our initial operations, we will focus on bulk water sales. Bulk
water sales are achieved by the arrival of a tanker at our spring
site. The buyer loads the water at the spring site and takes it to
the bottling and packaging facility used by the private label
bottler. We are in the process of installing a state of the art bulk
water loading facility.
We currently do not have our own bottling and packaging facilities.
Should we sell water under the Seawright label we will do so by using
outside bottling and packaging facilities. Currently there are no
plans to build bottling and packaging facilities.
Comparison of Financial Results
Three Months and Six Months Ended June 30, 2004 versus Three Months
and Six Months Ended June 30, 2003
Revenues
No revenues have yet been generated from the Spring. We plan to begin
making sales in the next quarter.
Costs and Expenses
From our inception through June 30, 2004, we have incurred expenses
of $1,421,788, $747,103 of these expenses were accrued but legally
released from the creditors in agreements during the year ended
December 31, 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 June 30, 2004 operating expenses were
$59,490 and interest expenses were $17,714. In the six months ended
June 30, 2004 operating expenses amounted $105,879 and interest
expenses amounted $34,717. The expenses and interests were incurred
in connection with the establishment of our spring water business
including consulting and engineering services, testing and spring
maintenance and costs associated with the administration and overhead
of our business such as accounting, legal and office expenses.
Liquidity and Capital Resources
As of June 30, 2004, we had a working capital deficit of $708,851. As
a result of our operating losses from our inception through June 30,
2004, we generated a cash flow deficit of $488,480 from operating
activities. We met our cash requirements during the six months ended
June 30, 2004 through $153,500 of proceeds from the issuance of
common stock and approximately $91,800 in advances from our principal
shareholder. In respect of the common stock issuances, in April 2004
300,000 shares were issued for $90,000. We also issued 160,000 shares
of common stock to a shareholder in exchange for previously issued
stock options exercised at $.5625 per share. In exchange for the
shares, the holder of the option paid $63,500 in cash, and tendered
5,000 shares of our previously issued Series A preferred stock valued
at $5 per share. Our accounts payable and accrued liabilities of
approximately $181,000, is composed predominantly of liabilities to
our consultants and vendors associated with the Spring, our
accountants and lawyers, and accrued payroll, representing
liabilities to our remaining employee.
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.
Our independent certified public accountants have stated in their
report included in our December 31, 2003 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.
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 was re-paid 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 was 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 Shares
In October 2003, 55,000 Series A Convertible Preferred shares were
issued and proceeds of $275,000 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 55,000 have been sold to date. The shares
are convertible into common stock at the option of the holder at a
ratio of 10 Common Shares for each preferred share if converted
before the first anniversary of the original issue date and at a
ratio of 5 Common Shares 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 Shares upon conversion of the Preferred
Shares to Common Shares. In event of a liquidation of our company the
Preferred Shares ranks higher than the Common Shares in determining
the distribution of assets and surplus funds.
In the quarter ended June 30, 2004, 5000, Series A Convertible
Preferred shares were cancelled as part payment for exercise of stock
options in exchange for common stock.
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.
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 June 30, 2004, 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 There can be no
assurance that we will be able to achieve or manage any such growth.
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, 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.
NONE
ITEM 2. CHANGES IN SECURITIES.
In April 2004, we issued an aggregate of 460,000 shares of our
Common Stock to two shareholders in exchange for cash and stock
options exercised. These transactions were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933
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 June 30, 2004.
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.
32.1 Certification of Joel Sens pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Joel Sens pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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.
Formerly Pre-Settlement Funding Corp.
Dated: August 12, 2004 By: /s/ Joel Sens
Joel Sens, President
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: August 12, 2004
/s/ Joel Sens
Joel Sens, President