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
MARCH 31, 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.
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:
None
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 May 14, 2004.
TABLE OF CONTENTS
Part I - Financial Information Page
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 March 31, 2004 and
December 31, 2003
Condensed Consolidated Statements of Losses for the three months
March 31, 2004 and 2003 and the Period October 14, 1999
(Date of Inception) Through March 31, 2004
Condensed Consolidated Statement of Deficiency in Stockholders'
Equity for the Period October 14, 1999
(Date of Inception) Through March 31, 2004
Condensed Consolidated Statements of Cash Flows for the three
months March 31, 2004 and 2003 and the Period
October 14, 1999 (Date of Inception) Through
March 31, 2004
Notes to Unaudited Condensed Consolidated Financial Information
SEAWRIGHT HOLDINGS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
March 31, 2004 December 31, 2003
ASSETS
Current Assets:
Cash and cash equivalents $ 10,438 $ -
Total current assets 10,438 -
Property and Equipment:
Land 1,000,000 1,000,000
Building improvements 6,780 6,780
1,006,780 1,006,780
Other Assets:
Discontinued operations, claimed
receivable , net of $0 allowance 6,000 6,000
Total Assets 1,023,218 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 170,308 148,548
Notes Payable, current portion 415,000 415,000
Advances from shareholder 198,695 121,936
Total current liabilities 784,003 710,172
Long Term Liabilities:
Note payable, long term portion 400,000 400,000
Total Liabilities 1,184,003 1,110,172
Commitments and Contingencies - -
Deficiency in Stockholders' Equity
Preferred stock, par value, $.001
per share; 100,000 shares authorized:
Series A Convertible Preferred
stock , par value$.001 per share,
60,000 authorized; 55,000 issued
and outstanding at March 31, 2004
and December 31, 2003 55 55
Common stock, par value, $.001
per share; 19,900,000 shares
authorized; 5,368,000 shares
issued and outstanding at March
31, 2004 and December 31, 2003 5,368 5,368
Additional paid-in-capital 463,873 463,873
Deficit accumulated during
development stage (630,081) (566,688)
Deficiency in stockholder's equity (160,785) (97,392)
Total Liabilities and Deficiency
in Stockholders' Equity 1,023,218 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)
For The Three Months Ended March 31, For The period October 14, 1999
(Date of Inception) through
2004 2003 March 31, 2004
Revenues: $ - $ - $ -
Costs and expenses:
Selling, general and administrative 46,390 49,650 1,362,299
Total costs and expenses 46,390 49,650 1,362,299
Loss from operations (46,390) (49,650) (1,362,299)
Other income (expenses):
Extinguishment of debt - - 747,103
Interest expense (17,003) - (31,786)
Total other income (expenses) (17,003) - 715,317
Loss from continuing operations, before
income taxes and discontinued
operations (63,393) (49,650) (646,982)
Provision for income taxes - - -
Net loss from continuing operations,
before discontinued operations (63,393) (49,650) (646,982)
Net income from discontinued
operations - 1,125 16,901
Net loss (63,393) (48,525) (630,081)
Loss per common share (basic and assuming
dilution) (0.01) (0.01)
Weighted average shares outstanding
Basic and assuming diluted 5,368,000 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 MARCH 31, 2004
Preferred Preferred Shares Common Common Additional Deficit
Shares Amount Shares 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)
Stock options issued in
exchange for services
(Note F) - - - - 5,276 - 5,276
Preferred stock
issued in
exchange for cash at
$5 per share (Note E) 55,000 55 - - 274,945 - 275,000
Net loss at
December 31, 2003 - - - - - 506,846 506,846
Balance at
December 31, 2003 55,000 55 5,368,000 5,368 463,873 (566,688) (97,392)
Net loss - - - - - (63,393) (63,393)
Balance at
March 31, 2004 55,000 55 5,368,000 5,368 463,873 (630,081) (160,785)
See accompanying notes to unaudited condensed consolidated
financial information
SEAWRIGHT HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended March 31, For The period October 14, 1999
(Date of Inception) through
2004 2003 March 31, 2004
INCREASE (DECREASE) IN CASH
AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period from
continuing operations $ (63,393) $ (49,650) $ (646,982)
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
Changes in assets and liabilities:
Loans receivable - - -
Claims receivable - - (6,000)
Prepaid expenses and other - 1,500 -
Cash disbursed in excess of
available fund (24,689) - -
Accounts payable and accrued
liabilities 21,761 45,622 917,411
NET CASH (USED IN) OPERATING
ACTIVITIES (66,321) (1,403) (410,477)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - - (1,006,780)
NET CASH (USED IN) INVESTING ACTIVITIES - - (1,006,780)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
capital notes, net - - 139,000
Proceeds from notes payable - - 815,000
Proceeds from issuance of
preferred stock, net of
costs and fees - - 275,000
Proceeds from shareholder
advances, net of repayments 76,759 1,400 198,695
NET CASH PROVIDED BY
FINANCING ACTIVITIES 76,759 1,400 1,427,695
NET (DECREASE) IN CASH AND
EQUIVALENTS 10,438 (3) 10,438
Cash and cash equivalents at
the beginning of the period - 18 -
Cash and cash equivalents at
the end of the period 10,438 15 10,438
Supplemental Disclosures of
Cash Flow Information
Cash paid during the period
for interest - - -
Income taxes paid - - -
Common stock issued to
founders - - 5,020
Common stock issued for
services - - 45,000
Stock options issued in
exchange for services rendered - - 5,276
See accompanying notes to unaudited condensed consolidated
financial information
SEAWRIGHT HOLDINGS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 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 three-months period ended March 31, 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., formerly Pre-Settlement Funding
Corporation ("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 March 31, 2004, the Company has accumulated
losses of $630,081.
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:
For The Three Months Ended March 31, For The period October 14, 1999
(Date of Inception) through
2004 2003 March 31, 2004
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
y
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:
For The Three Months Ended March 31,
2004 2003
Net income (loss) - as reported $ (63,393) $ (48,525)
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 (63,393) (48,525)
Net income (loss) attributable to
common stockholders - Pro forma (63,393) (48,525)
Basic (and assuming dilution) earning
(loss) per share - as reported (0.01) (0.01)
Basic (and assuming dilution) earning
(loss) per share - Pro forma (0.01) (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 March 31, 2004 and December
31, 2003, the Company has 55,000 shares of Series A Convertible
Preferred Stock issued and outstanding.
The Company has authorized 19,900,000 shares of common stock,
with a par value of $.001 per share. As of March 31, 2004 and
December 31, 2003, there are 5,368,000 shares of common stock
issued and outstanding.
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 the
Company's 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 the
Company's 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.
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
Remaining Weighted
Exercise Number Contractual Life Weighed Average Number Average
Prices Outstanding (Years) Exercise Price Exercisable Exercise Price
(C)
$ 1.25 1,500,000 0.75 $ 1.25 1,500,000 $ 1.25
$ 0.56 837,500 2.75 0.56 837,500 0.56
2,337,500 $ 1.00 2,337,500 1.00
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 - -
Canceled or expired - -
Outstanding at March 31, 2004 2,337,500 1.00
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
March 31, 2004.
NOTE D- PROPERTY AND EQUIPMENT
In October, 2003, the Company acquired approximately 140 acres
of land and related improvements in Augusta County, Virginia, in
exchange for $1,000,000, comprised of $300,000 of cash and a
$700,000 promissory note payable. The Company anticipates
entering the sale of bulk spring water and retail bottling
business utilizing the properties water resources.
The purchase of land and improvements were accounted for in
accordance with SFAS No. 141 and accordingly the operating
results of the business has been included in the Company's
financial statements since the date of purchase and inception of
operations.
Major classes of property and equipment at March 31, 2004 and
December 31, 2003 consist of the followings:
March 31, 2004 December 31, 2003
Land $ 1,000,000 $ 1,000,000
Building improvements 6,780 6,780
1,006,780 1,006,780
Less: Accumulated Depreciation (-) (-)
Net Property and Equipment 1,006,780 1,006,780
Building improvement represents preparations for the enhancement
of the facilities at the spring site. The Company has not
starting depreciation whilst improvements are under way.
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
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 under private labeling
agreements with other retailers or distributors. Private label
bottled water is Seawright Springs water bottled under another
company's brand name.
We intend that 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 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 Ended March 31, 2004 versus Three Months Ended
March 31, 2003
Revenues
No revenues have yet been generated from the Spring. We anticipate that we
will begin making sales in the next quarter.
Costs and Expenses
From our inception through March 31, 2004, we have incurred
expenses of $1,362,299, $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 March
31, 2004 operating expenses of $46,390 and interest expenses of
$17,003 were incurred in connection with the establishment of
our spring water business including consulting services, testing
and spring maintenance and costs associated with the
administration and overhead of our business such as accounting,
legal and office expenses. This compares with expenses of
$49,650 recorded in the quarter to March 31, 2003 which were
primarily administrative overhead costs.
Liquidity and Capital Resources
As of March 31, 2004, we had a working capital deficit of
$773,565. As a result of our operating losses from our inception
through March 31, 2004, we generated a cash flow deficit of
$410,477 from operating activities. We met our cash requirements
during the three months ended March 31, 2004 through
approximately $76,000 in advances from our principal
shareholder. Our accounts payable and accrued liabilities of
$170,000, 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 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 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.
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 March 31, 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.
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
Three month period ending March 31, 2004.
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 March 31, 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. 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.
Formerly Pre-Settlement Funding Corp.
Dated: May 14, 2004 By: /s/ Joel Sens, President
Exhibit No. Description
(1) Form of Amended Underwriting and Selling Agreement between
Pre-Settlement Funding and Three Arrows Capital Corp. is
incorporated by reference to the Company's registration
statement on Form SB-2 as filed with the SEC on March 9, 2001.*
(3) (i) Amended and Restated Certificate of Incorporation is
incorporated by reference to the Company's registration
statement on Form SB-2 as filed with the SEC on March 9, 2001.*
(3) (ii) Amended and Restated Certificate of Incorporation of
Pre-Settlement Funding Corporation, filed on Form 8-K as filed
on October 24, 2004.*
(3) (iii) Certificate of Designation of Series A Convertible
Preferred Shares of Seawright Holdings, Inc. filed on Form 8-
K as filed on October 24, 2004.*
(3) (iv)Amended and Restated Bylaws is incorporated by reference to
the Company's registration statement on Form SB-2 as filed
with the SEC on March 9, 2001.*
(3) (v) Amended and Restated Bylaws of Seawright Holdings, Inc. filed
on Form 8-K as filed on October 24, 2004.*
(4) (i) Amended Form of Subscription Agreement is incorporated by
reference to Post-Effective Amendment No. 1, filed on Form
SB-2 on July 6, 2001.*
(4) (ii)Form of 10% Convertible Note is incorporated by reference
to the Company's registration statement on Form SB-2 as
filed with the SEC on March 9, 2001.*
(4) (iii)Form of Registration Agreement relating to the 10%
Convertible Notes is incorporated by reference to the
Company's registration statement on Form SB-2 as filed with
the SEC on March 9, 2001.*
(4) (iv)Subscription Agreement dated October 26, 2000 by and
between Pre-Settlement Funding Corporation and Joel P. Sens
is incorporated by reference to the Company's registration
statement on Form SB-2 as filed with the SEC on March 9, 2001.*
(4) (v) Subscription Agreement dated October 26, 2000 by and
between Pre-Settlement Funding Corporation and Darryl Reed
is incorporated by reference to the Company's registration
statement on Form SB-2 as filed with the SEC on March 9, 2001.*
(4) (vi)Form of Common Stock Purchase Option relating to Exhibits 4
(iv) and 4 (v) is incorporated by reference to the
Company's registration statement on Form SB-2 as filed with
the SEC on March 9, 2001.*
(4) (vii)Form of Amended Escrow Agreement by and between Pre-
Settlement Funding Corporation, Three Arrows Capital Corp.
and The Business Bank, is incorporated by reference to
Post-Effective Amendment No. 1, filed on Form SB-2 on July 6, 2001.*
(9) Stockholder Agreement by and among Pre-Settlement Funding
Corporation, Joel P. Sens and Darryl W. Reed, dated October
26, 2000 is incorporated by reference to the Company's
registration statement on Form SB-2 as filed with the SEC
on March 9, 2001.*
(10) (i)Form of Purchase and Security Agreement is incorporated by
reference to the Company's registration statement on Form
SB-2 as filed with the SEC on March 9, 2001.*
(10) (ii)Employment Agreement between Pre-Settlement Funding
Corporation and Darryl Reed dated October 1, 2000 is
incorporated by reference to the Company's registration
statement on Form SB-2 as filed with the SEC on March 9, 2001.*
(10) (iii)Employment Agreement between Pre-Settlement Funding
Corporation and Joel Sens dated October 1, 2000 is
incorporated by reference to the Company's registration
statement on Form SB-2 as filed with the SEC on March 9, 2001.*
(10) (iv)Letter by Typhoon Capital Consultants, LLC to Pre-
Settlement Funding Corporation on December 11, 2001
withdrawing as a consultant to Pre-Settlement Funding
Corporation and waiving all rights to any cash or equity
compensation owed to it by Pre-Settlement Funding
Corporation except for the fifty thousand (50,000) shares
already issued to Typhoon Capital Consultants, LLC, is
incorporated by reference to Post-Effective Amendment No.
5, filed on Form SB-2 on January 16, 2002.*
(10) (v)Form of Consultant Agreement dated January 8, 2001 between
Pre-Settlement Funding Corporation and Chukwuemeka A. Njoku
is incorporated by reference to Post-Effective Amendment
No. 1, filed on Form SB-2 on July 6, 2001.*
(10) (vi)Letter Agreement for consulting services dated August
31, 2000 between Pre-Settlement Funding Corporation and
Graham Design, LLC s incorporated by reference to the
Company's registration statement on Form SB-2 as filed with
the SEC on March 9, 2001.*
(10) (vii)Letter Agreement for consulting services dated June
13, 2000 between Pre-Settlement Funding Corporation and
Baker Technology, LLC s incorporated by reference to the
Company's registration statement on Form SB-2 as filed with
the SEC on March 9, 2001.*
(10) (viii) Purchase and Sale Agreement By and Between Baker Seawright
Corporation, Seller and Stafford Street Capital, LLC, filed on
Form 8-K as filed on October 24, 2004.*
(10) (ix) Assignment of Contract pursuant to Purchase and Sale
Agreement filed on Form 8-K as filed on October 24, 2004.*
(10) (x) Amendment to Purchase and Sale Agreement filed on Form 8-K
as filed on October 24, 2004.*
(10) (xi) Resignation by Darryl Reed from his positions as President,
Chief Executive Officer and Director filed on Form 8-K as filed
on October 24, 2004.*
31.1 Certification pursuant of Chief Executive Officer to 18 U.S.C.
Section 1350, as adopted to Section 906 of the Sarbanes Oxley
Act of 2002.
31.2 Certification pursuant of Chief Financial Officer to 18 U.S.C.
Section 1350, as adopted to Section 906 of the Sarbanes Oxley
Act of 2002.
* Documents previously filed with the Securities and Exchange Commission
CERTIFICATION
I, Joel Sens, certify that:
1. I have reviewed this report on Form 10-QSB of Seawright
Holdings, Inc.;
2. Based on my knowledge, this 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 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 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 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 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 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: May 14, 2004
/s/ Joel Sens
Joel Sens, President, Treasurer, Secretary and Director