UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-KSB





(Mark
      One)


x Annual
      report
      under Section 13 or 15(d) of the Securities Exchange Act of 1934





For
      the
      fiscal year ended December 31, 2006





o 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.


(Name
      of
      Small Business Issuer in Its Charter)




Delaware
              54-1965220(State
                  or Other Jurisdiction of
              (I.R.S.
                  EmployerIncorporation
                  or Organization)
              Identification
                  No.)600
                  Cameron Street, Alexandria Virginia
              22314(Address
                  of Principal Executive Offices)
              (Zip
                  Code)


(703)
      340-1629


(Issuer's
      telephone number, Including Area Code)





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: None





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. x





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) been subject
      to
      such filing requirements for the past 90 days.


Yes
x No
o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. Yes x No
      o





Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act. Yes o  No
      x





State
      issuer's revenues for its most recent fiscal year: $3,304 .





The
      trading price of the registrant's stock on the OTC Bulletin Board on March
      30,
      2007 was $0.96/share bid price and $0.965 /share
      ask price. The average bid and ask price was $0.9625 /share.
      Based on this $0.9625 value,
      the aggregate market value of common stock owned by non-affiliates of the
      registrant was approximately $6,005,261 ,
      calculated on the basis of 6,239,232 shares
      of
      common stock owned by non-affiliates.





As
      of
      March 30, 2007, the total number of issued and outstanding shares of the
      issuer's common stock, par value $0.001, was 9,760,166.





Transitional
      Small Business Disclosure Format: Yes o  No x










TABLE
                OF CONTENTSPAGEPART
                IITEM
                1.
            Description
                of Business
            3ITEM
                2.
            Description
                of Property
            10ITEM
                3.
            Legal
                Proceedings
            11ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            11PART
                IIITEM
                5.
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities12ITEM
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            14ITEM
                7.
            Financial
                Statements
            24ITEM
                8.
            Changes
                in and Disagreements with Accountants onAccounting
                and Financial Disclosure
            24ITEM
                8A.
            Controls
                and Procedures
            24PART
                IIIITEM
                9.
            Directors
                and Executive Officers of the Registrant
            26ITEM
                10.
            Executive
                Compensation
            28ITEM
                11.
            Security
                Ownership of Certain Beneficial Owners andManagement
                and Related Stockholder Matters
            29ITEM
                12.
            Certain
                Relationships and Related Transactions
            30ITEM
                13.
            Exhibits
            31ITEM
                14.
            Principal
                Accountant Fees and Services
            34Signatures
            
            35


2


PART
      I.





FORWARD-LOOKING
      STATEMENTS





When
      used
      in this Form 10-KSB and in our future filings with the Securities and Exchange
      Commission, the words or phrases "will likely result," "management expects,"
      "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
      speaks only as of the date made. These forward-looking statements are subject
      to
      risks, uncertainties and other factors which cause actual results to differ
      materially from those identified by the forward-looking statements, some of
      which are described below, including without limitation in Part III, Item 6,
      Management’s Discussion and Analysis or Plan of Operation, under the heading
“Trends, Risks and Uncertainties.” We have no obligation to update any
      forward-looking statements to reflect events or circumstances occurring after
      the date of such statements.








ITEM
      1.
      BUSINESS.





Introduction




We
      incorporated under the laws of the State of Delaware on October 14, 1999,
      originally under the name Pre-Settlement Funding Corporation. In September
      2003,
      we changed our name to Seawright Holdings, Inc. Seawright Springs, LLC is a
      wholly owned subsidiary of Seawright Holdings, Inc. and holds title to the
      Mt.
      Sydney property described below.




Discontinued
      Operations




As
      a
      result of our acquisition of real property and improvements in October 2003,
      we
      restructured our operations to focus on the development of a spring water
      bottling and distribution business. This restructuring included discontinuing
      our previous practice of financing plaintiffs who are involved in personal
      injury claims.




Business
      and Basis of Presentation




From
      our
      inception through the date of these financial statements, we have recognized
      limited revenues and incurred significant operating expenses. Consequently,
      our
      operations are subject to all risks inherent in the establishment of a new
      business enterprise. For the period from inception through December 31, 2006,
      we
      have accumulated losses of $3,799,571.





3




In
      October 2003, we acquired property that generates natural spring water. Through
      the acquisition of this property, we intend to enter the business of producing
      and selling spring water in Mt. Sidney, Virginia, which is located in the
      Shenandoah Valley. The property has a natural flow of spring water in excess
      of
      1,000,000 gallons of water daily.




The
      main
      focus of our current operations is the establishment of a business that produces
      and sells spring water from our Mt. Sidney property, although we may pursue
      other business opportunities that we deem appropriate.




In
      December 2004, we entered into agreements to acquire two parcels of land located
      approximately 10 miles south of our Mt. Sidney property and have consummated
      both of those agreements. We are considering leasing these properties for
      commercial purposes. See “Description of Property” below.




Business
      Strategy




Our
      strategy is to focus on selling natural spring water under the “Seawright
      Springs” label while aggressively pursuing the bulk sale of natural spring water
      produced on our Mt. Sidney property.




In
      addition to our own brand, we expect to also continue to seek opportunities
      to
      sell our daily supply of water to other bottlers. We may enter into co-packing
      arrangements, where other bottlers bottle our water under our name, or private
      labeling agreements, where our water is bottled under another company’s name.
      Selling our water under private labeling agreements will allow us to sell our
      water without incurring the high costs of advertising required to establish
      brand recognition and market identity.




We
      currently do not have our own bottling and packaging facilities and we intend
      to
      have outside providers bottle and package our brand of water.




We
      have
      installed an updated bulk water loading facility at the Mt. Sidney spring site.
      Now, private labeled bottlers will be able to load water at our spring site
      and
      transport it to their bottling and packaging facilities.





Bottled
      Water Market Overview





Demand
      for bottled water has grown significantly in recent years, and in particular
      demand for products that contain spring water. In 2005, total U.S. bottled
      water
      volume surpassed 7.5 billion gallons, which was a 10.7% advance over 2004's
      volume level and bottled water remains the fastest growing major beverage
      segment. In 2005, bottled water category continues as the second largest
      commercial beverage in the United States.




**U.S.
                BOTTLED WATER MARKET****Volume
                and Producer Revenues****2001
                - 2005**




**Millions
                of**
            
            
            **Annual**
            
            
            **Millions
                of**
            
            
            **Annual****Year**
            
            
            **Gallons**
            
            
            **%
                Change**
            
            
            **Dollars**
            
            
            **%
                Change**2001
            
            
            5,185.2
            
            
            9.7%
            
            $
            6,880.6
            
            
            12.6%2002
            
            
            5,795.7
            
            
            11.8%
            
            $
            7,901.4
            
            
            14.8%2003
            
            
            6,269.8
            
            
            8.2%
            
            $
            8,526.4
            
            
            7.9%2004
            
            
            6,806.7
            
            
            8.6%
            
            $
            9,169.4
            
            
            7.5%2005
            
            
            7,537.1
            
            
            10.7%
            
            $
            10,012.5
            
            
            9.2%***Source:
                Beverage Marketing
                Corporation***




4




During
      the five-year period from 2001 to 2005, bottled water volume increased by an
      average growth rate of 9.8%, which growth rate exceeded the growth rates of
      all
      other beverage categories.





Per
      capita consumption of bottled water has been growing by at least one gallon
      annually. In 2005, the per capita consumption of water in the United States
      increased 9.6% from 2004’s rate, which means annual bottled water consumption by
      U.S. residents is second only to carbonated soft drinks .




**U.S.
                BOTTLED WATER MARKET****Per
                Capita Consumption****2001
                - 2005**




**Gallons**
            
            **Annual****Year**
            
            **Per
                Capita**
            
            **%
                Change**2001
            
            
            18.8
            
            
            8.7%2002
            
            
            20.9
            
            
            10.7%2003
            
            
            22.4
            
            
            7.3%2004
            
            
            24.0
            
            
            7.6%2005
            
            
            26.1
            
            
            9.6%***Source:
                Beverage Marketing
                Corporation***





The
      bottled water market comprises three major segments: still or non-sparkling,
      sparkling, and imported water, which includes both non-sparkling and sparkling
      segments. The Company's spring water may be used in both sparkling and
      non-sparkling applications.




The
      Beverage Marketing Corporation categorizes water into three main
      categories.





*
      Non-sparkling or still water, which contains no carbonation and is consumed
      as
      an "alternative to tap water."





*
      Sparkling water, which contains either natural or artificial carbonation and
      is
      positioned to compete in the broad "refreshment beverage" field.





*
      Imported water, which includes both sparkling and non-sparkling water produced
      and bottled outside the U.S., and which is targeted to "image-conscious
      consumers."




5




**U.S.
                BOTTLED WATER MARKET****Volume
                & Growth by Segment****2001
                - 2005**




**Non-Sparkling**
            
            **Domestic
                Sparkling**
            
            **Imports**
            
            **Total****Year**
            
            
            **Volume***
            
            
            **Change**
            
            
            **Volume***
            
            
            **Change**
            
            
            **Volume***
            
            
            **Change**
            
            
            **Volume***
            
            
            **Change**2001
            
            
            4,917.3
            
            
            10.7%
            
            
            144.0
            
            
            -0.1%
            
            
            123.9
            
            
            -10.1%
            
            
            5,185.2
            
            
            9.7%2002
            
            
            5,487.5
            
            
            11.6%
            
            
            149.5
            
            
            3.8%
            
            
            158.7
            
            
            28.1%
            
            
            5,795.7
            
            
            11.8%2003
            
            
            5,923.9
            
            
            8.0%
            
            
            152.6
            
            
            2.1%
            
            
            193.3
            
            
            21.8%
            
            
            6,269.8
            
            
            8.2%2004
            
            
            6,411.3
            
            
            8.2%
            
            
            166.8
            
            
            9.3%
            
            
            228.6
            
            
            18.3%
            
            
            6,806.7
            
            
            8.6%2005
            
            
            7,169.5
            
            
            11.8%
            
            
            185.0
            
            
            10.9%
            
            
            182.7
            
            
            -20.1%
            
            
            7,537.1
            
            
            10.7%*
                Millions of gallons***Source:
                Beverage Marketing
                Corporation***





Non-sparkling
      water (still water) remains the largest segment of bottled water, with 11.8%
      and
      8.2% growth in that area in 2005 and 2004, respectively.





The
      bottled still water business, which will represent our most significant product
      area, has been consistently growing at rates between 8.0% and 11.8% per annum
      since 2001 according to the Beverage Marketing Corporation. Still water now
      comprises over 95% of all of the bottled water gallonage sold in the United
      States.





Geographic
      Markets and Distribution Channels





Bottled
      water is sold through various channels, including:





·
            Home
                Delivery (1 to 5 gallon bottles)





·
            Commercial
                and Office Delivery (1 to 5 gallon
                bottles)





·
            Off
                Premise Retail (supermarkets, convenience store, and drug
                store)





·
            On-Premise
                Retail (restaurants)





·
            Vending
                Machines





·
            Institutional
                Usage (hospitals, schools)





·
            Bulk
                Sales (Domestic and International sales of potable
                water)





6




Bottled
      Water Classifications and Definitions





The
      Company’s water qualifies as natural spring water and is a mineral water
      containing 300 parts per million (ppm) total dissolved solids (TDS). The various
      classifications of water are contained in the paragraphs that
      follow.




Bottled
      water or drinking water is water that is intended for human consumption and
      that
      is sealed in bottles or other containers with no added ingredients except that
      it may optionally contain safe and suitable anti-microbial agents. Fluoride
      may
      be optionally added within the limitations established by the U.S. Food and
      Drug
      Administration ("FDA"). Firms may manufacture non-standardized bottled water
      products with ingredients such as minerals for flavor. The common or usual
      name
      of the resultant product must reflect these additions. Bottled water or drinking
      water may be used as an ingredient in beverages (e.g., diluted juices or
      flavored bottled waters). It does not include those food ingredients that are
      declared in ingredient labeling as "water", "carbonated water," "disinfected
      water," "filtered water," "seltzer water," "soda water," "sparkling water,"
      and
      "tonic water."





Natural
      water is bottled spring, mineral, artesian, or well water which is derived
      from
      an underground formation or water from surface water that only requires minimal
      processing. Natural water is not derived from a municipal system or public
      water
      supply, and is unmodified except for limited treatment (e.g., filtration,
      ozonation or equivalent disinfection process).





Spring
      water is water derived from an underground formation from which water flows
      naturally to the surface of the earth. Spring water must comply with the FDA
      standard of identity. Spring water must be collected only at the spring or
      through a borehole tapping the underground formation feeding the spring. There
      must be a natural force causing the water to flow to the surface through a
      natural orifice. The location of the spring must be identified and such
      identification must be maintained in a company's records. Spring water collected
      with the use of an external force must be from the same underground striation
      as
      the spring, as shown by a measurable hydraulic connection using a
      hydro-geologically valid method between the bore hole and the natural spring,
      and must have all the physical properties, before treatment, and be of the
      same
      composition and quality, as the water that flows naturally to the surface of
      the
      earth. If spring water is collected with the use of an external force, water
      must continue to flow naturally to the surface of the earth through the spring's
      natural orifice.





Mineral
      water is water containing not less than 250 parts per million (ppm) total
      dissolved solids (TDS), coming from a source tapped at one or more boreholes
      or
      springs, originating from a geologically and physically protected underground
      water source. Mineral water shall be distinguished from other types of water
      by
      its constant level and relative proportions of minerals and trace elements
      at
      the point of emergence from the source, due account being taken of the cycles
      of
      natural fluctuations. No minerals may be added to this water.





Sparkling
      bottled water is bottled water that, after treatment and possible replacement
      of
      carbon dioxide, contains the same amount of carbon dioxide that it had at the
      emergence from the source. Manufacturers may add carbonation to previously
      non-carbonated bottled water products and label such water appropriately (e.g.,
      sparkling spring water).




7




Well
      water or "Artesian" water is bottled water from a well tapping a confined
      aquifer in which the water level stands at some height above the top of the
      aquifer. Artesian water may be collected with the assistance of external force
      to enhance the natural underground pressure.





Ground
      water is water from a subsurface saturated zone that is under a pressure equal
      to or greater than atmospheric pressure. Ground water must not be under the
      direct influence of surface water.





Purified
      water is bottled water produced by distillation, de-ionization, reverse osmosis,
      or other suitable process and that meets the definition of purified
      water.





Government
      Regulation of Bottled Water





Prior
      to
      1996, bottled water was regulated in the same fashion as municipal water.
      Municipal water is regulated not as a food by the FDA, but as a commodity by
      the
      Environmental Protection Agency ("EPA") pursuant to the Safe Drinking Water
      Act
      of 1974 ("SDWA"), which only provided for certain mineral/chemical content
      requirements so as to ensure water safety, not product definition.





In
      1996,
      the United States enacted statutes and regulations to regulate bottled water
      as
      a food. Accordingly, the Company's water must meet FDA standards for
      manufacturing practices and chemical and biological purity. Furthermore, these
      standards undergo a continuous process of revision. The labels affixed to
      bottles and other packaging of the water is subject to FDA restrictions on
      health and nutritional claims for foods.





As
      of
      1996, bottled water is fully regulated as a food by the FDA under the Federal
      Food, Drug, and Cosmetic Act, which defines food as "articles used for food
      or
      drink for man or other animals." This includes packaged (bottled) water sold
      in
      containers at retail outlets as well as containers distributed to the home
      and
      office market. This legislation was designed to ensure that bottled water
      companies clearly and accurately define the type of water that was being bottled
      and sold to the public. The FDA adopted the basic mineral/chemical guidelines
      employed by the EPA, while making some aspects more stringent.





In
      addition, all drinking water must meet EPA standards established under the
      SDWA
      for mineral and chemical concentration. The 1986 amendments to the SDWA mandated
      the establishment of new drinking water quality and treatment regulations.
      Most
      municipalities meet or exceed EPA drinking water regulations, many of that
      reflect recent public awareness of the issue of contaminated water-For example,
      EPA standards for lead in drinking water did not exist prior to 1986, when
      50
      ppb (parts per billion) was established. This standard was lowered to 15 ppb
      in
      1991, because after five years the government still found 130 million people
      exposed to unacceptable lead levels.


The
        United States government also enacted Safe Drinking Water Reauthorization
        Act of
        1996. This law requires all local water utilities to issue annual reports
        to
        their consumers disclosing all chemicals and bacteria in their
        water.


8





Bottled
      water is also subject to state and local regulation. Bottled water must
      originate from an "approved source" in accordance with standards prescribed
      by
      the state health department in each of the states in which our products will
      be
      sold. The source must be inspected and the water sampled, analyzed and found
      to
      be of safe and wholesome quality. There are annual "compliance monitoring tests"
      of both the source and the bottled water. The health departments of the
      individual states also govern water purity and safety, labeling of bottled
      water
      products and manufacturing practices of producers. Our Mt. Sidney property
      has
      been inspected and approved by the Virginia Department of Agriculture as a
      source of spring water. We are also required to make certain disclosures and
      disclaimers on our labels.





Compliance
      with these various regulations has not had, and we do not expect such compliance
      to have, any material adverse effect on our capital expenditures, net income
      or
      competitive position.





Competition





The
      beverage industry, and in particular the bottled water industry, is extremely
      competitive and seasonal. The leaders in the U.S. bottled water business, based
      on total estimated sales (at wholesale), according to the Beverage Marketing
      Corporation, are Aquafina, Dasani, Poland Spring, Arrowhead, Sparkletts, Deer
      Park and Crystal Geyser. Depending upon the method of entry and plan of action
      a
      particular company chooses to employ, it can be very costly to penetrate this
      market and expand. Our initial focus on the bulk sale of spring water is a
      relatively low cost plan of action.





Marketing
      Objectives and Advertising Strategy





Our
      initial marketing strategy is targeted primarily to build awareness of our
      natural spring water among private label bottlers and to develop our own labeled
      product for sale. We have recently acquired, and are presently developing,
      packaging for selling our water under the name “Seawright Springs” and are
      positioning our water in an effort to compete in the luxury brand category
      of
      the water market.





Intellectual
      Property





In
      June
      2005, we purchased intellectual property from Quibell Partners, L.L.C. relating
      to the creation and bottling of flavored and non-flavored bottled water,
      including, but not limited to, the following:




·  certain
      trademarks, service marks, trade names, service names and logos;


·  various
      glass bottle designs;


·  bottle
      label designs and artwork for water bottle carrypacks;


·  formulas
      for flavored sparkling water and for teas; and


·  web
      site
      coding.




We
      expect
      that this acquisition will assist us in establishing and growing market share
      in
      the bottled water and tea market. We also own the domain name www.seawrightsprings.com .




Research
      and Development





We
      did
      not incur any research and development expenses in the last two
      years.




9


Employees
 
 As
        of
        December 31, 2006, we had one employee, Joel Sens, who serves as our president,
        chief executive officer, secretary and treasurer. During 2006, Mr. Sens received
        an annual salary of $180,000.


ITEM
      2.
      PROPERTIES.





Our
      principal executive offices are located at 600 Cameron Street, Alexandria,
      Virginia 22314. We lease these facilities on a month-to-month basis at a cost
      of
      $192 per month. We believe these facilities are suitable for our current
      needs.




In
      October 2003, we acquired land and a spring located in Mt. Sidney, Virginia
      for
      $1,000,000 and a $50,000 assignment fee. Stafford Street Capital LLC, a business
      entirely owned by our principal stockholder, our chief executive officer and
      director, Joel Sens, contracted to purchase the property in June 2003 and
      assigned all its interests in the contract in October 2003 to Seawright Springs
      LLC, our wholly owned subsidiary. At the closing of the property acquisition,
      $300,000 was paid in cash, and $700,000 became subject to a promissory note
      carrying an interest rate of 6% per annum. Under the terms of the promissory
      note, $100,000 plus interest was due and paid in April 2004 and $200,000 plus
      interest was due and paid in October 2004. We paid off the remaining amount
      due
      under the promissory note, ahead of schedule, using proceeds from our private
      placement, in the first quarter of 2005. We also were able to negotiate a
      $60,000 reduction in the amount of principal owed on the promissory note, which
      has been accounted for as a gain on the extinguishment of debt. Had we not
      renegotiated the amount owed and paid the promissory note ahead of schedule,
      $162,500 plus interest would have been due in October 2006 and $237,500 plus
      interest would have been due in October 2008, the fifth anniversary of the
      acquisition. The Mt. Sidney property is insured under a general liability policy
      in the amount of $1,000,000.




In
      December 2004, we entered into agreements to acquire two parcels of land located
      approximately 10 miles south of our Mt. Sidney property. The properties are
      located in the city of Staunton, Virginia. We closed the purchase on one parcel,
      which is a 33.52 acre site, on May 24, 2005. The purchase price for that parcel
      was $725,000, of which $225,000 was paid in cash. The remaining $500,000 of
      the
      purchase price was secured by a note on which we were obligated to pay interest
      at a rate of 8% per annum, payable semiannually, the first payment of interest
      of which was due and paid on November 20, 2005. During June 2006, we obtained
      a
      9.375% $525,000 loan to refinance the aforementioned loan which is secured
      by
      the property. Under the terms of the new agreement, 35 regular installments
      of $4,592 each and one balloon payment equal to the remaining principal balance
      of the loan, accrued interest, and other applicable fees, costs and charges
      is
      due in June 2009. The 33.52 acre property is insured under a general liability
      policy in the amount of $1,000,000.




The
      second parcel is a 3.46 acre site that we agreed to purchase for a purchase
      price of $240,000. We paid a refundable $10,000 deposit on this 3.46 acre site
      in April 2005. We concluded the study period and closed the purchase of the
      second parcel of land on April 10, 2006.




10




Although
      no assurances can be given, both sites are expected to be re-zoned to commercial
      use from general agriculture use according to the master zoning plan of the
      city
      of Staunton, Virginia. In the future, we may lease these properties for
      commercial purposes.





In
      November of 2005, we executed a contract for the purchase of unimproved property
      in August County, Virginia. The contract provided for a 90-day study period
      and
      required us to make a refundable deposit of $50,000. During the course of the
      study period, we decided to terminate the contract. We received a refund of
      our
      deposit in April of 2006.






ITEM
      3.
      LEGAL PROCEEDINGS.





We
      are
      not aware of any material litigation or potential litigation affecting us or
      our
      assets or any of our subsidiaries.







ITEM
      4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





No
      matters were submitted during the fourth quarter of fiscal year 2006 to a vote
      of the security holders.





11




PART
      II.





ITEM
      5.
      MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES





Market
      Information





Prior
      to
      January 9, 2004, there was no public trading market for our securities. On
      January 9, 2004, our securities began trading on the OTC Bulletin Board
      (“OTCBB”) maintained by members of the National Association of Securities
      Dealers, Inc. (“NASD”) under the symbol SWRI.OB. As of April 16, 2007, there
      were approximately 111 holders of record of our common stock.




The
      following table sets forth the range of high and low bid prices for our common
      stock for each applicable quarterly period. The table reflects inter-dealer
      prices without retail mark-up, mark-down or commissions and may not represent
      actual transactions.




**Fiscal
                Year Ended**
              **December
                31, 2006****High($)***
            **Low($)***Fourth
                Quarter
            0.75
            0.40Third
                Quarter
            1.00
            0.60Second
                Quarter
            1.50
            0.60First
                Quarter
            0.75
            0.45**Fiscal
                Year Ended**
              **December
                31, 2005****High($)***
            **Low($)***Fourth
                Quarter
            1.05
            0.40Third
                Quarter
            0.85
            0.70Second
                Quarter
            1.00
            0.65First
                Quarter
            1.05
            0.40


________________


*
      Quotations provided by YAHOO FINANCE





Penny
      Stock Regulation.





Shares
      of
      our common stock are subject to rules adopted by the Securities and Exchange
      Commission that regulate broker-dealer practices in connection with transactions
      in “penny stocks.” Penny stocks are generally equity securities with a price of
      less than $5.00 (other than securities registered on certain national securities
      exchanges or quoted on the Nasdaq system, provided that current price and volume
      information with respect to transactions in those securities is provided by
      the
      exchange or system). The penny stock rules require a broker-dealer, prior to
      a
      transaction in a penny stock not otherwise exempt from those rules, deliver
      a
      standardized risk disclosure document prepared by the Securities and Exchange
      Commission, which contains the following:





12


·
            a
                description of the nature and level of risk in the market for penny
                stocks
                in both public offerings and secondary
                trading;


·
            a
                description of the broker's or dealer's duties to the customer and
                of the
                rights and remedies available to the customer with respect to violation
                to
                such duties or other requirements of securities'
                laws;


·
            a
                brief, clear, narrative description of a dealer market, including
                "bid"
                and "ask" prices for penny stocks and the significance of the spread
                between the "bid" and "ask" price;


·
            a
                toll-free telephone number for inquiries on disciplinary
                actions;


·
            definitions
                of significant terms in the disclosure document or in the conduct
                of
                trading in penny stocks; and


·
            such
                other information and is in such form (including language, type,
                size and
                format), as the Securities and Exchange Commission shall require
                by rule
                or regulation.





Prior
      to
      effecting any transaction in penny stock, the broker-dealer also must provide
      the customer the following:





·
            the
                bid and offer quotations for the penny
                stock;


·
            the
                compensation of the broker-dealer and its salesperson in the
                transaction;


·
            the
                number of shares to which such bid and ask prices apply, or other
                comparable information relating to the depth and liquidity of the
                market
                for such stock; and


·
            monthly
                account statements showing the market value of each penny stock held
                in
                the customer's account.





In
      addition, the penny stock rules require that prior to a transaction in a penny
      stock not otherwise exempt from those rules, the broker-dealer must make a
      special written determination that the penny stock is a suitable investment
      for
      the purchaser and receive the purchaser's written acknowledgement of the receipt
      of a risk disclosure statement, a written agreement to transactions involving
      penny stocks, and a signed and dated copy of a written suitability statement.
      These disclosure requirements may have the effect of reducing the trading
      activity in the secondary market for a stock that becomes subject to the penny
      stock rules. Holders of shares of our common stock may have difficulty selling
      those shares because our common stock will probably be subject to the penny
      stock rules.





Dividend
      Information





We
      have
      not declared or paid cash dividends on our common stock or made distributions
      in
      the past, and we do not anticipate that we will pay cash dividends or make
      cash
      distributions in the foreseeable future. We currently intend to retain and
      invest future earnings, if any, to finance our operations.


13


**ITEM
        6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
        OPERATION.**
 
 As
        defined under Part I, under Forward-Looking Statements, the forward-looking
        statements in the discussion that follows 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
        a variety of 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 our
        financial statements 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
        2003,
        we purchased property containing a spring located in Mt. Sidney, Virginia
        in the
        Shenandoah Valley with the intention of developing a spring water distribution
        business. The spring has a flow in excess of 1,000,000 gallons of water
        daily.
  We
        have
        chosen to develop and acquire packaging for selling our water under the brand
        names Seawright Springs and Quibell. We have developed two proprietary
        Polyethylene Terephthalate, or PET, bottles in a 16.9 ounce size and a 33.8
        ounce size. In addition, in June 2005 we acquired from Quibell, glass bottle
        designs for various sized bottles (including 237 ml, 385 ml, 750 ml and 1
        liter
        sizes) as well as labels for various sized sparkling water bottles, spring
        water
        bottles and tea bottles (including 237 ml, 385 ml, 750 ml, 1 liter, 1.5 liter
        and 16.9 ounce bottles).
  We
        are
        positioning our water in an effort to compete in the luxury brand category
        of
        the water market. We expect to offer a non-sparkling brand and to begin selling
        bottled water under the “Seawright Springs” brand name in May of 2007. We will
        also continue to seek opportunities to sell our daily supply of water to
        other
        bottlers.
 
 In
        May of
        2005 and April of 2006, respectively, we closed on the purchase of two parcels
        of land located approximately 10 miles south of the Mt. Sidney property.
        Both of
        these properties are currently zoned for agricultural use. Although no
        assurances can be given, both sites are expected to be re-zoned to commercial
        use according to the master zoning plan of the city of Staunton, Virginia.
        If
        these properties are rezoned for commercial use, we may lease these properties
        for commercial purposes.
  14
  The
        further development of this business will require, among other things, further
        capital expenditure on plant and equipment, developing marketing materials,
        renting additional office space, and interviewing and hiring administrative,
        marketing and maintenance personnel. While we have raised the capital necessary
        to meet our working capital and financing needs in the past, additional
        financing is required in order to meet our current and projected cash flow
        deficits from operations and development. We believe that it will be necessary
        to raise further capital to implement our business plan over the course of
        the
        next twelve months.
  For
        the
        period from our inception through December 31, 2006, we have:
 ·
                formed
                    our company and established our initial structure;·
                sought
                    and pursued investment opportunities;·
                reviewed
                    and analyzed the potential market for natural spring
                    water;·
                purchased
                    the Mt. Sidney property and procured the necessary financing
                    to cover the
                    initial purchase costs from an offering of preferred
                    stock;·
                entered
                    into two agreements, both of which have closed, to purchase properties
                    near the Mt. Sidney property, which we are considering leasing
                    for
                    commercial purposes;·
                purchased
                    trademarks and other intellectual property relating to the creation
                    and
                    bottling of flavored and non-flavored bottled water;·
                performed
                    required testing of water quality at spring site;·
                began
                    developing a new web site as part of our marketing strategy;
                    and·
                made
                    improvements to the spring site and water collection
                    facilities.
 
 Product
        Research and Development
  We
        do not
        anticipate performing research and development for any products during the
        next
        twelve months.
 
 
 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 have made improvements to plant and equipment at the
        spring site, and we have spent approximately $250,000 to complete the renovation
        of our spring catchment, which protects the water spring from outside elements.
  
 Number
        of
        Employees
  As
        of
        December 31, 2006, we had one employee, our chief executive officer and
        president, Joel Sens. We anticipate that the number of employees may increase
        in
        the future. However, given our ability to contract out much of our required
        services, it is not anticipated, based on the current business plan, that
        new
        employees will be hired in the next twelve months. No formal contract for
        the
        compensation of Mr. Sens exists as of December 31, 2006, but we may enter
        into
        an employment contract with him within the next twelve months.
  15
  Comparison
        of Financial Results
 
 Years
        Ended December 31, 2006 and 2005
 
 
 Revenues
 
 During
        the years ended December 31, 2006 and 2005, $3,304 and $2,524 of revenue,
        respectively, was generated from the Mt. Sidney spring from on-site sales.
        We
        expect to increase our sales in future quarters and will remain a development
        stage company until revenues increase significantly.
 
 
 Costs
        and
        Expenses
 
 From
        our
        inception through December 31, 2006, we have incurred losses of $3,799,571.
        These losses were associated principally with maintenance and engineering
        costs
        associated with the spring site, including testing of water quality, 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.
 
 We
        incurred operating expenses of $1,393,009 during the year ended December
        31,
        2006 as compared to $946,457 of expenses in during the year ended December
        31,
        2005. Expenses for the year ended December 31, 2006 are composed principally
        of
        salary, legal and accounting fees, financing expense on our funding instruments,
        and consulting fees.
  During
        the years ended December 31, 2006 and 2005, we incurred a realized net loss
        of
        $1,570 and $54,592, respectively, from our trading of marketable
        securities.
 
 
 Liquidity
        and Capital Resources
 
 As
        of
        December 31, 2006, we had working capital deficit of $1,386,875, an available
        cash balance of $2,986, a marketable securities balance of $17,993 and an
        accounts payable and accrued liabilities balance, including accrued interest
        on
        the convertible notes, of $452,418.
 
 In
        August
        2004 we issued a private placement memorandum to offer up to 1,000 units
        of
        equity/notes payable instruments. Each unit consisted of 2,500 shares of
        our
        common stock, $1,500 of convertible promissory notes, and a warrant to purchase
        300 shares of our common stock at $0.85 per share. The convertible promissory
        notes accrue interest at 11% per annum, and are payable and due in September
        2009. The note holders have the option to convert any unpaid note principal
        and
        accrued interest to our common stock at a rate of $0.85 per share anytime
        after
        six months from the issuance date of the note. The private placement was
        closed
        in February of 2005. Over the course of our private placement, we received
        total
        proceeds of $2,665,116, net of placement costs and fees, and issued to investors
        $1,498,500 of convertible promissory notes, 2,497,500 shares of common stock
        and
        999 warrants, none of which have been converted to common stock. Part of
        the
        proceeds of the private placement was used to pay off the remaining debt
        on the
        Mt. Sidney property.
  16
  The
        purchase of one of the two Staunton, Virginia properties mentioned above
        was
        closed on May 24, 2005. The purchase price for that parcel was $725,000,
        of
        which $225,000 was paid in cash. The remaining $500,000 of the purchase price
        has been financed through a bank loan. We also completed the purchase of
        the
        second Staunton, Virginia property on April 10, 2006. The purchase price
        for the
        second property was $240,000, less a previously made $10,000 refundable deposit.
        We paid $90,000 of the remaining purchase price at settlement and have financed
        the remaining $140,000.
 
 Our
        accounts payable and accrued liabilities of $452,418 is composed predominantly
        of liabilities to our consultants and vendors associated with the Mt. Sidney
        spring, our accountants and lawyers and accrued interest on our convertible
        notes payable.
 
 In
        order
        to provide funding for operations and capital expenditures, on September
        12,
        2005, we entered into an investment agreement with Dutchess Private Equities
        Fund, L.P., or Dutchess, that provides us with an Equity Line of Credit.
        The
        investment agreement provides that, following notice to Dutchess, we may
        require
        Dutchess to purchase, or put, up to $5,000,000 in shares of our common stock
        during the 36-month period following the date on which a registration statement
        of our common stock is declared effective by the Securities and Exchange
        Commission. Pursuant to the investment agreement, Dutchess is required to
        pay a
        purchase price equal to 95% of the lowest closing best bid price of our common
        stock on the Over-the-Counter Bulletin Board, or the OTCBB, during the five
        trading days following that put notice. We may, at our election, require
        Dutchess to purchase an amount equal to no more than either (a) 200% of the
        average daily volume of our common stock for the 10 trading days prior to
        the
        put notice date, multiplied by the average of the three daily closing bid
        prices
        immediately preceding the put notice date or (b) $100,000; provided that
        in no
        event will the amount Dutchess is required to purchase exceed $1,000,000
        with
        respect to any single put. We are obligated to register for resale the shares
        of
        common stock issuable pursuant to the investment agreement pursuant to a
        registration rights agreement dated as of September 12, 2005, between Dutchess
        and us. However, We are under no obligation to draw down under the equity
        line
        of credit.
 
 On
        November 20, 2006, a registration statement on Form SB-2 pertaining to the
        Company’s common stock was declared effective by the Securities and Exchange
        Commission. The registration statement related to the sale of shares of the
        Company’s common stock by our stockholders.  The
        Securities and Exchange Commission limited the amount of shares of the Company’s
        common stock that the Company could register under the investment agreement
        to
        1,000,000 shares of the Company’s common stock. Accordingly, although the
        investment agreement remains a viable agreement the Company can only require
        Dutchess to purchase up to 1,000,000 shares, thereby reducing the amount
        of
        money available to the Company.
 
 During
        December 2006, the Company entered into a promissory note with a face amount
        of
        $780,000. Under the terms of the note, the Company received $650,000 less
        closing costs of $50,075 creating a calculated effective interest rate of
        35%.
        As a further incentive, we agreed to issue 250,000 shares of our common stock
        to
        Duchess. The fair value of the shares, $127,500, has been accounted for as
        deferred financing costs to be amortized over the life of the note. An incentive
        stock liability was recorded to account for our obligation at year end 2006.  As
        detailed in the agreement, the Company shall make payments to the holder
        in the
        amount of the greater of (a) 100% of each Put (as defined in the investment
        agreement) given to the investor from the Company or (b) made in 12 monthly
        increments of $65,000. The agreement is collateralized by signed put notices
        under the investment agreement, as well a lien on the Company’s goods,
        inventory, general intangibles, and all associated documents and chattel
        paper.
        Moreover, Joel Sens, the President and Chief Executive Officer of the Company
        has pledged certain personal property.
  17
  Future
        Funding Requirements and Going Concern
 
 While
        we
        have raised the capital necessary to meet our working capital and financing
        needs in the past, additional financing is required in order to meet our
        current
        and projected cash flow deficits from operations and development. Within
        the
        next year, funds will be needed to meet our obligations under the purchase
        agreements for the Staunton, Virginia properties and to fund improvements
        to our
        spring site and our initial operations.
  We
        intend
        to generate these funds from our equity line of credit. We believe that proceeds
        from the equity line of credit will allow us to cover our capital and operating
        expenses over the next year.
  If
        during
        that period or thereafter, we are not successful in generating sufficient
        liquidity from operations or in raising sufficient capital resources on terms
        acceptable to us, this could have a material adverse effect on our business,
        results of operations, liquidity and financial condition.
 
 Our
        independent certified public accountants have stated in their report included
        herein that we have incurred operating losses since our 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.
 
 Off-Balance
        Sheet Arrangements
 
 We
        have
        not had, and at December 31, 2006, do not have, any off-balance sheet
        arrangements that have or are reasonably likely to have a current or future
        effect on our financial condition, changes in financial condition, revenues
        or
        expenses, results of operations, liquidity, capital expenditures or capital
        resources that is material to investors.
  Inflation
  It
        is the opinion of the Company that inflation has not
        had a material effect on its operations.
 
 Critical
        Accounting Policies
 
 The
        preparation of our consolidated financial statements in conformity with
        accounting principles generally accepted in the United States requires us
        to
        make estimates and judgments that affect our reported assets, liabilities,
        revenues, and expenses, and the disclosure of contingent assets and liabilities.
        We base our estimates and judgments on historical experience and on various
        other assumptions we believe to be reasonable under the circumstances. Future
        events, however, may differ markedly from our current expectations and
        assumptions. While there are a number of significant accounting policies
        affecting our consolidated financial statements, we believe the following
        critical accounting policies involve the most complex, difficult and subjective
        estimates and judgments:
 
 ·
              stock-based
                  compensation; and·
              revenue
                  recognition.
  18
  Stock
        Based Compensation
 
 On
        January 1, 2006, the Company adopted the provisions of Statement of Financial
        Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” which
        requires the measurement and recognition of compensation expense for all
        stock-based awards made to employees based on estimated fair values.
        SFAS No. 123(R) supersedes previous accounting under Accounting
        Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
        Employees” for periods beginning in fiscal 2006. In March 2005, the SEC issued
        Staff Accounting Bulletin (“SAB”) No. 107, providing supplemental
        implementation guidance for SFAS 123(R). The Company has applied the
        provisions of SAB No. 107 in its adoption of
        SFAS No. 123(R).
 
 SFAS No. 123(R)
        requires companies to estimate the fair value of stock-based awards on the
        date
        of grant using an option pricing model. The value of the portion of the award
        that is ultimately expected to vest is recognized as expense over the requisite
        service periods. The Company adopted SFAS No. 123(R) using the
        modified prospective application, which requires the application of the standard
        starting from January 1, 2006, the first day of the Company’s year. The
        Company’s consolidated financial statements for the year ended December 31,
        2006, reflect the impact of SFAS No. 123(R).
 
 Prior
        to
        the adoption of SFAS No. 123(R), the Company accounted for stock-based
        awards to employees using the intrinsic value method in accordance with APB
        No. 25, as allowed under SFAS No. 123, “Accounting for
        Stock-Based Compensation.” Under the intrinsic value method, no stock-based
        compensation expense for employee stock options had been recognized in the
        Company’s consolidated statements of operations because the exercise price of
        the Company’s stock options granted to employees equaled the fair market value
        of the underlying stock at the date of grant. In accordance with the modified
        prospective transition method the Company used in adopting
        SFAS No. 123(R), the Company’s results of operations prior to fiscal
        2006 have not been restated to reflect, and do not include, the impact of
        SFAS No. 123(R).
 
 Stock-based
        compensation expense recognized during a period is based on the value of
        the
        portion of stock-based awards that is ultimately expected to vest during
        the
        period.
 
 Stock-based
        compensation expense is measured using a multiple point Black-Scholes option
        pricing model that takes into account highly subjective and complex assumptions.
        The expected life of options granted is derived from the vesting period of
        the
        award, as well as historical exercise behavior, and represents the period
        of
        time that options granted are expected to be outstanding. Expected volatilities
        are based on a blend of historical volatility and implied volatility derived
        from publicly traded options to purchase the Company’s common stock, which the
        Company believes is more reflective of the market conditions and a better
        indicator of expected volatility than solely using historical volatility.
        The
        risk-free interest rate is the implied yield currently available on
        U.S. Treasury zero-coupon issues with a remaining term equal to the
        expected life of the option. There were no employee options granted during
        2006
        or 2005, and all employee options granted prior to 2005 had fully vested
        by
        January 1, 2005.
 
 Stock-based
        compensation expense related to 75,000 stock options issued to consultants
        for
        services rendered as recognized under SFAS No. 123(R) totaled $38,490
        for the year ended December 31, 2006. As of December 31, 2006, all stock
        options
        outstanding issued to consultants were fully vested.
  19
  Revenue
        Recognition
 
 For
        revenue from product sales, the Company recognizes revenue in accordance
        with
        Staff Accounting Bulletin No. 104, *Revenue
        Recognition* (“SAB104”), which superseded Staff Accounting Bulletin No. 101, *Revenue
        Recognition in Financial Statements* (“SAB101”). SAB 101 requires that four basic criteria must be met before revenue
        can be recognized: (1) persuasive evidence of an arrangement exists; (2)
        delivery has occurred; (3) the selling price is fixed and determinable; and
        (4)
        collectibility is reasonably assured. Determination of criteria (3) and (4)
        are
        based on management’s judgments regarding the fixed nature of the selling prices
        of the products delivered and the collectibility of those amounts. Provisions
        for discounts and rebates to customers, estimated returns and allowances,
        and
        other adjustments are provided for in the same period the related sales are
        recorded. The Company defers any revenue for which the product has not been
        delivered or is subject to refund until such time that the Company and the
        customer jointly determine that the product has been delivered or no refund
        will
        be required. SAB 104 incorporates Emerging Issues Task Force 00-21 (“EITF
        00-21”), *Multiple-Deliverable
        Revenue Arrangements.* EITF
        00-21 addresses accounting for arrangements that may involve the delivery
        or
        performance of multiple products, services and/or rights to use
        assets.
 
 
 Recent
        Accounting Pronouncements
  On
        February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
        Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
        Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
        Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
        instruments that have embedded derivatives to be accounted for as a whole
        (eliminating the need to bifurcate the derivative from its host) if the holder
        elects to account for the whole instrument on a fair value basis. SFAS 155
        also
        clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
        statement is effective for all financial instruments acquired or issued in
        fiscal years beginning after September 15, 2006. The Company does not
        expect its adoption of this new standard to have a material impact on its
        financial position, results of operations or cash flows.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for
        Uncertainty in Income Taxes—an interpretation of FASB Statement 109”, which
        provides guidance on the measurement, recognition, and disclosure of tax
        positions taken or expected to be taken in a tax return. The interpretation
        also
        provides guidance on derecognition, classification, interest and penalties,
        and
        disclosure. FIN 48 prescribes that a tax position should only be recognized
        if
        it is more-likely-than-not that the position will be sustained upon examination
        by the appropriate taxing authority. A tax position that meets this threshold
        is
        measured as the largest amount of benefit that is greater than 50 percent
        likely
        of being realized upon ultimate settlement. The cumulative effect of applying
        FIN 48 is to be reported as an adjustment to the beginning balance of retained
        earnings in the period of adoption. FIN 48 is effective for fiscal years
        beginning after December 15, 2006. The company is assessing the impact, if
        any, that the adoption may have on its financial statements.
 
 In
        March
        2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
        Financial Assets - an amendment to FASB Statement No. 140. Statement 156
        requires that an entity recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        service contract under certain situations. The new standard is effective
        for
        fiscal years beginning after September 15, 2006. The Company does not
        expect its adoption of this new standard to have a material impact on its
        financial position, results of operations or cash flows.
  20
  In
        September 2006, the FASB issued SFAS 157, *Fair
        Value Measurements* ,
        which
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles (“GAAP”), and expands disclosures about
        fair value measurements. The Company will be required to adopt SFAS 157
        effective for the fiscal year beginning January 1, 2008. The requirements
        of SFAS 157 will be applied prospectively except for certain derivative
        instruments that would be adjusted through the opening balance of retained
        earnings in the period of adoption. The Company is currently evaluating the
        impact of the adoption of SFAS 157 on the Company’s consolidated financial
        statements and the management believes that the adoption of SFAS 157 will
        not
        have a significant impact on its consolidated results of operations or financial
        position.
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        158, *Employers’
        Accounting for Defined Benefit Pension and Other Postretirement Plans - an
        amendment of FASB Statements No. 87, 88, 106, and 132R* (‘SFAS
        158’).  SFAS 158 changes current practice by requiring employers to
        recognize the overfunded or underfunded positions of defined benefit
        postretirement plans, including pension plans, on the balance sheet.  The
        funded status is defined as the difference between the projected benefit
        obligation and the fair value of plan assets.  SFAS 158 also requires
        employers to recognize the change in funded status in other comprehensive
        income
        (a component of shareholders’ equity).  SFAS 158 does not change the
        requirements for the measurement and recognition of pension expense in the
        statement of income.  SFAS 158 is effective for fiscal years ending after
        December 15, 2006.  The Company does not anticipate any material impact to
        its financial condition or results of operations as a result of the adoption
        of
        SFAS 158.
  In
        September 2006, the Securities and Exchange Commission (the “SEC”) released
        Staff Accounting Bulletin No. 108 (“SAB 108”), which provides detail in the
        quantification and correction of financial statement misstatements. SAB 108
        specifies that companies should apply a combination of the “rollover” and “iron
        curtain” methodologies when making determinations of materiality. The rollover
        method quantifies a misstatement based on the amount of the error originating
        in
        the current year income statement. The iron curtain approach quantifies
        misstatements based on the effects of correcting the misstatement existing
        in
        the balance sheet at the end of the current year, regardless of the year(s)
        of
        origination. SAB 108 instructs companies to quantify the misstatement under
        both
        methodologies and, if either method results in the determination of a material
        error, the Company must adjust its financial statements to correct the error.
        SAB 108 also reminds preparers that a change from an accounting principle
        that
        is not generally accepted to a principle that is generally accepted is a
        correction of an error. The Bulletin is effective for annual financial
        statements covering the first fiscal year ending after November 15, 2006.
        The adoption of this Bulletin did not have a material effect on the Company’s
        financial condition or results of operations.
 
 21
 In
        September 2006, the FASB ratified the consensus reached by the EITF on Issue
        No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit
        Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” EITF 06-4
        requires the recognition of a liability and related compensation costs for
        endorsement split-dollar life insurance policies that provide a benefit to
        an
        employee that extends to postretirement periods as defined in SFAS No. 106,
“ Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The
        EITF reached a consensus that “Company Owned Life Insurance” policies purchased
        for this purpose do not effectively settle the entity’s obligation to the
        employee in this regard, and thus the entity must record compensation cost
        and a
        related liability. Entities should recognize the effects of applying this
        Issue
        through either, (a) a change in accounting principle through a
        cumulative-effect adjustment to retained earnings or to other components
        of
        equity or net assets in the balance sheet as of the beginning of the year
        of
        adoption, or (b) a change in accounting principle through retrospective
        application to all prior periods. This Issue is effective for fiscal years
        beginning after December 15, 2007. The Company is assessing the impact, if
        any, that adoption may have on its financial statements.
 In
          December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
          Payment Arrangements (" FSP
          00-19 -2")
          which addresses accounting for registration payment arrangements. FSP
          00-19 -2
          specifies that the contingent obligation to make future payments or otherwise
          transfer consideration under a registration payment arrangement, whether
          issued
          as a separate agreement or included as a provision of a financial instrument
          or
          other agreement, should be separately recognized and measured in accordance
          with
          FASB Statement No. 5, Accounting for Contingencies. FSP
          00-19 -2
          further clarifies that a financial instrument subject to a registration
          payment
          arrangement should be accounted for in accordance with other applicable
          generally accepted accounting principles without regard to the contingent
          obligation to transfer consideration pursuant to the registration payment
          arrangement. For registration payment arrangements and financial instruments
          subject to those arrangements that were entered into prior to the issuance
          of
          EITF 00-19-2, this guidance is effective for financial statements issued
          for
          fiscal years beginning after December 15, 2006 and interim periods within
          those
          fiscal years. The adoption of FSP 00-19-2 is not expected to have a material
          impact on the Company’s financial condition or results of
          operations.
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities.” SFAS
        159
        permits entities to choose to measure many financial instruments, and certain
        other items, at fair value. SFAS
        159
        applies to reporting periods beginning after November 15, 2007. The adoption
        of
        SFAS 159 is not expected to have a material impact on the Company’s financial
        condition or results of operations.
 
 Trends,
        Risks and Uncertainties
 
 We
        have
        sought to identify what we believe to be the most significant risks to our
        business as discussed below, 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 to be evaluated. Our prospects
        must
        be evaluated with a view to the risks encountered by a company in an early
        stage
        of development. We will be incurring costs to develop, introduce and enhance
        our
        spring water operations and products, to develop and market an interactive
        website, to establish marketing relationships, to acquire and develop products
        that will complement each other, and to build an administrative organization.
        To
        the extent that such expenses are not followed by commensurate revenue, our
        business, results of operations and financial condition will be materially
        adversely affected. There can be no assurance that we will be able to generate
        sufficient revenues from sales of our products. We expect negative cash flow
        from operations to continue for at least the next 12 months, and we must
        raise
        additional capital to meet our expected expenses. We intend to raise this
        capital primarily through the equity line of credit as described above, but
        it
        is possible that the proceeds from the equity line of credit will be
        insufficient to cover our future expenses.
 
 22
  *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: market acceptance of our products, the demand for the spring water
        services and related products; seasonal trends in demand; the amount and
        timing
        of operating costs and capital expenditures relating to the expansion of
        our
        business, operations and infrastructure, and the implementation of marketing
        programs, key agreements and strategic alliances; our ability to obtain
        additional financing in a timely manner and on terms favorable to us; the
        introduction of new services and products by us or our competitors; price
        competition or pricing changes in the industry; technical difficulties; and
        general economic conditions specific to the beverage market and the spring
        water
        industry. 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.
  *We
        are subject to substantial competition and may not have the ability or the
        capital to compete effectively*
 
 The
        industry in which we expect our products to be sold is highly competitive.
        We
        may not have the ability or the capital to compete effectively in this
        environment. The significant competition in our industry could harm our ability
        to win business and increase the price pressure on our products. We face
        strong
        competition from a wide variety of firms, including large, multinational
        firms
        with far greater resources than we possess. Many of our competitors have
        considerably greater financial, marketing and technological resources than
        we
        do, which may make it difficult to sell our products. Many of our competitors
        also have longer operating histories and presence in key markets, greater
        name
        recognition, larger customer bases and significantly greater financial, sales
        and marketing, manufacturing, distribution, technical and other resources.
        As a
        result, these competitors may also be able to devote greater resources to
        the
        promotion and sale of their products.
 
 *Management
        of growth*
 
 We
        may
        experience significant growth, which would result in increased responsibilities
        for management and the need for additional employees. We believe that our
        ability to attract, train, and retain qualified technical, sales, marketing
        and
        management personnel will be a critical factor to our future
        success.
  Our
        future success will also be highly dependent upon our ability to successfully
        manage the anticipated expansion of our operations. Our ability to manage
        and
        support growth effectively will be substantially dependent on our ability
        to
        implement adequate financial and management controls, reporting systems and
        other procedures, and attract and retain sufficient numbers of financial,
        accounting, administrative and management personnel.
 
 Our
        future success also depends upon our ability to address potential market
        opportunities while managing 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 and adversely affected.
 23
  *Risks
        associated with acquisitions*
 
 Although
        we do not presently intend to do so, as part of our business strategy in
        the
        future, we could acquire assets and businesses relating to or complementary
        to
        our operations. Any acquisitions by us would involve risks commonly encountered
        in acquisitions of assets or 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
        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 any acquired businesses; our ongoing business
        could be disrupted and our management’s time and attention diverted; and we
        could be unable to integrate with any acquired businesses
        successfully.
  For
        example, in June 2005, we acquired certain trademarks and other intellectual
        property, including bottle designs and labeling as well as formulas for flavored
        sparkling water and teas. We expect that this acquisition will assist us
        in
        establishing and growing market share in the bottled water and tea market.
        However, if we are not able to successfully integrate these acquired assets
        into
        our business by selling more of our products and increasing our market share,
        we
        may not experience a return on investment commensurate with the acquisition
        cost.
 
 
 ITEM
        7.
        FINANCIAL STATEMENTS.
 
 Financial
        statements as of and for the year ended December 31, 2006, and for the year
        ended December 31, 2005 are presented in a separate section commencing on
        page
        F-1.
 
 
 ITEM
        8.
        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE.
 
 There
        have been no changes in or disagreements with our accountants since our
        formation that are required to be disclosed pursuant to Item 304 of Regulation
        S-B.
 
 
 ITEM
        8A.
        CONTROLS AND PROCEDURES.
 
 We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed by us in the reports that we file under
        the
        Exchange Act is recorded, processed, summarized and reported within the time
        periods specified in the Commission's rules and regulations, and that such
        information is accumulated and communicated to our management, including
        Joel
        Sens, our chief executive officer and treasurer, as appropriate to allow
        timely
        decisions regarding the required disclosures. Any system of controls can
        provide
        only reasonable, and not absolute, assurance that the objectives of the control
        system are met. In addition, the design of any control system is based on
        certain assumptions about the likelihood of future events. Because of these
        and
        other inherent limitations of control systems, there can be no assurance
        that
        any design will succeed in achieving its stated goal under all potential
        future
        conditions.
  24
  On
        April
        16, 2007, in filing our Annual Report on Form 10-KSB for the fiscal year
        ended
        December 31, 2006 (the “Original 10-KSB”) and a Current Report on Form 8-K (the
“Original 8-K”), we announced that we had concluded that our previously issued
        financial statements for the years ended December 31, 2005 and 2004 should
        no
        longer be relied upon, and restated those financial statements. On June 12,
        2006, due to certain errors in the financial statements in the Original 10-KSB,
        we announced, in an amendment to the Form 8-K (the Original 8-K, as so amended,
        the "Amended 8-K"), that the financial statements included in the Original
        10-KSB should no longer be relied upon. Those financial statements have
        been restated as of the date hereof in the amendment to the
        previously-filed Form 10-KSB (the Original 10-KSB, as so amended, the “Amended
        10-KSB”). In addition, in the Amended 8-K, we acknowledged that there were
        errors in our financial statements related to our Quarterly Reports on Form
        10-QSB for the fiscal quarters ended March 31, 2005, June 30, 2005 and September
        30, 2005, but determined that these errors did not affect those financial
        statements in such a material way as to require amending those quarterly
        reports.




The
      restatements changed, and the other error corrections will change, the
      accounting treatment afforded to our August 2004 private placement, the
      termination agreement (sometimes referred to as the put agreement) entered
      into
      with a shareholder in October 2004, our overpayment of amounts owed to a
      shareholder, and our proceeds from the sale of trading securities, and are
      further described in Note Q to our Consolidated Financial Statements for the
      years ended December 31, 2005 and 2004, as contained in the Amended 10-KSB,
      as
      well the Amended 8-K.




Our
      chief
      executive officer and treasurer (our principal financial officer) has evaluated,
      as of December 31, 2006, the effectiveness of the design, maintenance and
      operation of the Company's disclosure controls and procedures. Based on that
      evaluation, and as a result of the weaknesses that resulted in the restatements
      and other expected changes described above, our chief executive officer and
      treasurer has determined that our disclosure controls and procedures were not
      effective, at a reasonable assurance level, in ensuring that the information
      required to be disclosed by us in the reports that we file 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.
      Notwithstanding those weaknesses, we believe that our Consolidated Financial
      Statements for the years ended December 31, 2006 and 2005, as contained in
      the
      10-KSB, fairly present, in all material respects, our financial position,
      results of operations and cash flows for all periods presented
      therein.




During
      the year ended December 31, 2006, there were no changes in internal control
      over
      financial reporting that materially affected, or are reasonably likely to
      materially affect, the Company’s internal control over financial reporting,
      except as follows.




Our
      management is in the process of identifying deficiencies with respect to our
      disclosure controls and procedures and implementing corrective measures, which
      includes the establishment of new internal policies related to financial
      reporting.




Our
      chief
      executive officer and treasurer also conducted an evaluation of the Company’s
      internal controls over financial reporting to determine whether any changes
      occurred during the fourth fiscal quarter that have materially affected, or
      are
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting. During the preparation of the Company’s financial
      statements as of and for the year ended December 31, 2006, the Company
      identified the internal control weaknesses identified below. As a result of
      this
      conclusion, the Company has initiated the changes in internal control, to the
      extent possible given limitations in financial and manpower resources, also
      described below.





25


The
        Company became aware of its staffing needs and took steps to address its
        understaffed Finance and Accounting team to correct this material weakness.
        The
        Company engaged a professional services firm with extensive CFO-level management
        and SEC reporting experience in public companies. The Company feels this
        addition to the Company’s Finance and Accounting team will improve the quality
        of future period financial reporting. Management identified a material weakness
        based on the Company’s delay in closing its books. To correct this material
        weakness, checklists will be developed delineating tasks, preparation
        responsibilities, and review responsibilities targeting specific completion
        dates. The checklist will provide evidentiary support of work performed and
        reviewed. Specific checklists will be developed for non-quarter end months,
        quarter end months, and the annual close. These checklists have been developed
        and were implemented in the 2nd quarter 2006 close process and utilized in
        the
        preparation of the 2nd quarter 2006 Form 10-QSB and subsequent period
        ends.


PART
      III.





ITEM
      9.
      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.





Officers
      and Directors.





The
      names, ages, and respective positions of our directors, executive officers,
      and
      key employees are set forth below. We have no other promoters or control
      persons. The directors named below will serve until our next annual stockholders
      meeting or until their successors are duly elected and qualified. Directors
      are
      elected for a one-year term at the annual stockholders' meeting. Officers hold
      their positions at the will of the board of directors, absent any employment
      agreement.





At
      beginning of 2005, Joel Sens was the sole director of the Company. Following
      the
      closing of our private placement in January 2005, the Company added two new
      directors, Ronald Attkisson and Jeffrey Sens.





As
      of
      February 28, 2007, Ronald Attkisson resigned as a director of the Company.





Committees
      of the Board of Directors.





We
      do not
      presently have any active committees.





Compensation
      of Directors





Beginning
      with the first quarter of 2006, each director will be compensated at a annual
      rate of $7,500, paid quarterly, and are reimbursed for reasonable travel and
      other out-of-pocket expenses incurred in attending meetings of the
      board.





26




Joel
      Sens, President, Chief Executive Officer, Treasurer and Secretary
      /Director





Mr.
      Joel
      Sens, age 42, is the current president, chief executive officer, treasurer
      and
      secretary and has served in those positions since 2004. Mr. Sens has also been
      a
      director of the Company since our inception. Mr. Sens is an entrepreneur who
      was
      a founder of Next Generation Media Corp., a publicly held media holding company,
      in March 1997. From January 1994 through March 1997, Mr. Sens acted as a
      consultant specializing in barter transactions and engaged in financial
      transactions involving the purchase and sale of newspaper companies, radio
      stations, and barter companies.





Jeffrey
      Sens, Director





Mr.
      Jeffrey Sens, age 42, previously served as a director from 1999 to 2004 and
      became a director again in January 2005. He currently holds a senior operations
      position in the FedEx Ground Division of FedEx Corp, which he has held since
      2001. From 1997 to 2001, Jeffrey Sens was vice president of Operations for
      Top
      Driver Inc., a national driver training products and services company that
      partners with Ford Motor Company. Prior to working at Top Driver Inc., Jeffrey
      Sens held a variety of senior operations management positions with prominent
      consumer product companies such as Sara Lee Corp. (1995-1997) and President
      International Corp. (1992-1995). Jeffrey Sens has a Bachelor of Science in
      Industrial Engineering from the University of Toledo and an MBA from Clemson
      University. Jeffrey Sens is the brother of Joel Sens.




Section
      16(a) Beneficial Ownership Reporting Compliance.





Section
      16(a) of the Exchange Act requires our officers and directors, and persons
      who
      own more than ten percent (10%) of a registered class of our equity securities
      (collectively, the "Reporting Persons") to file reports of changes in ownership
      of such securities with the Securities and Exchange Commission and the Company.
      Based solely on a review of (i) any Forms 3 and 4 and amendments thereto
      furnished to us pursuant to Rule 16a-3(e), promulgated under the Exchange Act,
      during our fiscal year ended December 31, 2006 and (ii) any Forms 5 and
      amendments thereto and/or written representations furnished to the Company
      by
      any Reporting Persons stating that such person was not required to file a Form
      5
      during our fiscal year ended December 31, 2006, it has been determined that
      no
      Reporting Persons were delinquent with respect to such person's reporting
      obligations set forth in Section 16(a) of the Exchange Act.





Code
      of
      Ethics





We
      have
      not adopted a formal code of ethics that applies to our directors, officers
      or
      employees. We are a development stage company with no principal operating
      activities and limited resources. We also have only one employee, who holds
      all
      of our officer positions. Because of these factors, we have not yet adopted
      a
      formal code of ethics, but we expect to adopt such a code in the
      future.





27





ITEM
      10.
      EXECUTIVE COMPENSATION.





Joel
      Sens
      received compensation totaling $420,000 in respect of his services during the
      last three full fiscal years. Joel Sens received total compensation of $90,000
      in respect of services performed by him from 2002 to 2004 and received $150,000
      and $180,000 in respect of services performed by him in 2005 and 2006,
      respectively. There have been no other awards or stock based compensation in
      the
      last three fiscal years.




Although
      no formal employment agreement has been entered into with Joel Sens, he
      currently receives an annual salary of $180,000 per year.




The
      table
      set forth below summarizes the annual and long-term compensation paid by us
      during the years ended December 31, 2006, 2005 and 2004 to or for the account
      of
      Joel Sens, our chief executive officer, president, treasurer and
      secretary.







SUMMARY
      COMPENSATION TABLE




Name
                  and Principal Position
              Year
              Annual
                  Compensation
              Long-Term
                  Compensation
              All
                  Other CompensationSalary
                ($)
              Bonus
                ($)
              Other
                  Annual Compensation
                ($)
              Awards
              PayoutsRestricted
                  Stock Award(s)
                ($)
              Securities
                  Underlying Options / SARs (#)
              LTIP
                  Payouts
                ($)Joel
                  Sens,
                CEO
              2006
              180,000
              0
              0
              0
              0
              0
              02005
              150,000
              0
              0
              0
              0
              0
              02004
              90,000
              0
              0
              0
              0
              0
              0







AGGREGATED
      OPTION/SAR EXERCISES IN LAST FISCAL YEAR


AND
      FY-END OPTION/SAR VALUES


Name
              
              Shares
                  Acquired on Exercise (#)
              
              Value
                  Realized ($)
              
              Number
                  of Securities Underlying Unexercised Options/SARs At FY-End (#)
                  Exercisable / Unexercisable
              
              Value
                  of Unexercised In-The-Money Options/SARs At FY-End ($) Exercisable
                  /
                  UnexercisableJoel
                  Sens, CEO
              
              
              0
              
              
              0
              
              
              1,500,000/0
              
              $
              0(1)/0


(1)
      This
      amount is calculated by valuing the Company’s shares at $0.48/share, based on
      the average of the bid and ask prices at December 31, 2006.





28




Under
      an
      October 2000 subscription agreement with Joel Sens, we issued 3,000,000 shares
      of our common stock to Joel Sens, as founder, at a price of $0.001 per share.
      In
      addition, under the October 2000 subscription agreement, we granted Joel Sens
      stock options exercisable for 1,500,000 shares of our common stock, as
      follows:





· 400,000
      shares of our common stock at $0.50 per share;


· 300,000
      shares of our common stock at $1.00 per share;


· 300,000
      shares of our common stock at $1.75 per share; and


· 500,000
      shares of our common stock at $2.00 per share.




Joel
      Sens
      has not exercised any of these options. Stock options previously issued for
      Darryl Reed were cancelled in an agreement dated September 2003 between Darryl
      Reed and us.






ITEM
      11.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.





The
      following table sets forth information regarding the beneficial ownership of
      shares of our common stock as of April 16, 2007 (issued and outstanding) by
      (i)
      all stockholders known to the Company to be the beneficial owner of more than
      five percent of the Company's outstanding common stock; and (ii) all directors
      and executive officers of the Company individually and as a group:





Title
                of Class
            
            Name
                and Address of Beneficial Owner(1)
            
            Amount
                and Nature of Beneficial
              Ownership(2)
            
            Percent
                of
              Class
                (2)Common
                Stock
            
            
            Joel
                Sens
            
            
            4,958,434
                (3
            )
            
            37.01 %600
                Cameron Street
              Alexandria
                VA 22314Common
                Stock
            
            
            Jeffrey
                Sens
            
            
            2,100
            
            
            0.02
                %1210
                Springtree Lane
              Westerville,
                Ohio 43801Common
                Stock
            
            
            All
                executive officers
            
            
            4,960,534
            
            
            37.03
                %and
                directors as a group
              (2
                persons)





*
      less
      than 1%





(1)
      Each
      person has sole voting power and sole dispositive power as to all of the shares
      shown as beneficially owned by them.





(2)
      Other
      than as footnoted below, none of these security holders has the right to acquire
      any shares within sixty days from options, warrants, rights, conversion
      privilege, or similar obligations. The amount owned and the stockholder’s
      percentage ownership is based on issued common stock, as well as stock options
      and warrants that are currently exercisable.





(3)
      Included within this amount are stock options granted to Joel Sens, as part
      of
      his October 2000 subscription agreement. These stock options are exercisable
      for
      1,500,000 shares of our common stock as described under “Executive Compensation”
above. Also included within this amount is 71,000 shares owned by Stafford
      Street Capital LLC, an entity wholly owned by Joel Sens.





29




Securities
      Authorized for Issuance Under Equity Compensation Plans




The
      following information is provided for the fiscal year ended December 31, 2006,
      with respect to compensation plans (including individual compensation
      arrangements) under which our equity securities are authorized for issuance,
      aggregated as follows:




(i)
            All
                compensation plans (including individual compensation arrangements)
                previously approved by our stockholders;
                and




(ii)
            All
                compensation plans (including individual compensation arrangements)
                not
                previously approved by our
                stockholders.






EQUITY
                COMPENSATION PLAN INFORMATIONNumber
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
              (a)
            Weighted-average
                exercise price of outstanding options, warrants and rights
                (b)
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Equity
                compensation plans approved by stockholders
            0
            0
            0Equity
                compensation plans not approved by stockholders
            1,500,000
            1.35
            0Total
            1,500,000
            1.35
            0





Under
      the
      October 2000 subscription agreement, we granted Mr. Sens stock options
      exercisable for 1,500,000 shares of our common stock as described under
“Executive Compensation” above.








ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





Related
      Party Transactions.





Our
      President and principal shareholder Joel Sens had advanced funds to the Company
      for working capital purposes. We had paid in full the amount due to Joel Sens
      during the years ended December 31, 2004. Additionally, the total payment we
      remitted exceeded the total balance due to Joel Sens in the amount of $42,951,
      $50,500 and $144,006 during the years ended December 31, 2006, 2005 and 2004,
      respectively. We have accounted for the excess payments to Joel Sens as a
      nonreciprocal transfer to a shareholder for 2006, 2005 and 2004 and,
      accordingly, has reflected the overpayment as a direct reduction of additional
      paid-in capital.





During
      2005, Joel Sens contributed capital of $140,000 to us in direct response to
      the
      excess payment. We have accounted for the net contribution of $89,500 as an
      addition to paid-in capital.




During
        2006, Joel Sens contributed capital of $54,505 to us in direct response to
        the
        excess payment. We have accounted for the contribution as an addition to
        paid-in
        capital.


30


One
        of
        our directors, Ronald L. Attkisson, is also the principal stockholder of
        Jones,
        Byrd and Attkisson, which, from August 2004 until February 2005, acted as
        placement agent for our private placement. In connection with its role as
        placement agent, Jones, Byrd and Attkisson received a fee of $299,700 and
        was
        issued 594,000 warrants exercisable for 594,000 shares of our common stock
        at
        $0.85 per share. Jones, Byrd and Attkisson is also acting as placement agent
        under the investment agreement with regard to the equity line of credit.
        Under
        our placement agent agreement for the equity line of credit, we agreed to
        pay
        Jones, Byrd and Attkisson 1% of the gross proceeds from each put exercised
        under
        the investment agreement.


Joel
      Sens, our only officer and one of our directors, is engaged in other businesses,
      either individually or through partnerships and corporations in which he has
      an
      interest, holds office, or serves on a board of directors. As a result, certain
      conflicts of interest may arise between us and Joel Sens. We will attempt to
      resolve such conflicts of interest in our favor. Joel Sens is accountable to
      us
      and our stockholders as a fiduciary, and is required to exercise good faith
      and
      integrity in handling our affairs. A stockholder may be able to institute legal
      action on behalf of the Company or on behalf of himself or herself and other
      similarly situated stockholders to recover damages or for other relief in cases
      of the resolution of conflicts is in any manner prejudicial to us.






PART
      IV.





ITEM
      13.
      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.





(a)
      Exhibits.





Exhibits
      included or incorporated by reference in this document are set forth in the
      Exhibit Index.





EXHIBIT
      INDEX





Exhibit
                No.
            Description3.1
            Amended
                and Restated Certificate of Incorporation of Pre-Settlement Funding
                Corporation.(1)3.2
            Certificate
                of Designation of Series A Convertible Preferred Shares of Seawright
                Holdings, Inc.(1)3.3
            Amended
                and Restated By-laws of Seawright Holdings, Inc.(1)4.1
            Form
                of Common Stock Certificate.(2)4.2
            Amended
                Form of Subscription Agreement.(3)4.3
            Form
                of 10% Convertible Note.(4)4.4
            Form
                of Registration Agreement relating to the 10% Convertible
                Notes.(5)4.5
            Subscription
                Agreement dated October 26, 2000 by and between Pre-Settlement Funding
                Corporation and Joel P. Sens.(6)4.6
            Subscription
                Agreement dated October 26, 2000 by and between Pre-Settlement Funding
                Corporation and Darryl Reed.(7)4.7
            Form
                of Common Stock Purchase Option.(8)4.8
            Form
                of Amended Escrow Agreement by and between Pre-Settlement Funding
                Corporation, Three Arrows Capital Corp. and The Business Bank.(9)





31





9
            Stockholder
                Agreement by and among Pre-Settlement Funding Corporation, Joel P.
                Sens
                and Darryl W. Reed, dated October 26, 2000.(10)10.1
            Form
                of Purchase and Security Agreement.(11)10.2
            Employment
                Agreement between Pre-Settlement Funding Corporation and Joel Sens
                dated
                October 1, 2000.(12)10.3
            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.(13)10.4
            Form
                of Consultant Agreement dated January 8, 2001 between Pre-Settlement
                Funding Corporation and Chukwuemeka A. Njoku.(14)10.5
            Letter
                Agreement for consulting services dated August 31, 2000 between
                Pre-Settlement Funding Corporation and Graham Design, LLC.(15)10.6
            Letter
                Agreement for consulting services dated June 13, 2000, between
                Pre-Settlement Funding Corporation and Baker Technology, LLC.(16)10.7
            Purchase
                and Sale Agreement by and between Baker Seawright Corporation, Seller
                and
                Stafford Street Capital, LLC.(1)10.8
            Amendment
                to Purchase and Sale Agreement.(1)10.9
            Assignment
                of Contract pursuant to Purchase and Sale Agreement.(1)10.10
            Confidential
                Private Placement Memorandum of Seawright Holdings, Inc. dated August
                20,
                2004.(17)10.11
            David
                Levy Termination Agreement dated October 1, 2004.(18)10.12
            Contract
                for Purchase of Unimproved Property dated as of November 23, 2004,
                by and
                between A.B.C. Farms, LLC and Seawright Holdings, Inc.(19)10.13
            Contract
                for Purchase of Unimproved Property dated as of February 24, 2005,
                by and
                between Robert J. Daly et al and Seawright Holdings, Inc.(20)10.14
            Note
                dated May 20, 2005, by Seawright Holdings, Inc. to A.B.C. Farms,
                LLC.(21)10.15
            Asset
                Purchase Agreement dated as of June 27, 2005, by and between Seawright
                Holdings, Inc. and QuiBell Partners, L.L.C.(22)10.16
            Investment
                Agreement dated as of September 12, 2005, by and between Seawright
                Holdings, Inc. and Dutchess Private Equities Fund, L.P.(23)





32





10.17
            Registration
                Rights Agreement dated as of September 12, 2005, by and between Seawright
                Holdings, Inc. and Dutchess Private Equities Fund, L.P.(23)10.18
            Placement
                Agent Agreement dated as of September 12, 2005, by and between Seawright
                Holdings, Inc. and Jones, Byrd and Attkisson, Inc.(23)10.19
            Consulting
              Agreement dated as of May 1, 2006, by and between Seawright Holdings,
              Inc.
              and National Financial Communications Corp.(25)10.19.1
            Amendment
              to Consulting Agreement dated as of September 6, 2006, by and between
              Seawright Holdings, Inc. and National Financial Communications
              Corp.(26)10.20
            Deed
              of Trust Note dated June 8, 2006, by and between Seawright Holdings,
              Inc.
              and Charter House, LLC.(27)10.21
            Business
              Loan Agreement (including the related Promissory Note and Commercial
              Guaranty) dated June 29, 2006, by and between Seawright Holdings, Inc.
              and
              Fidelity & Trust Bank.(28)10.22
            Modification
              Agreement to the Deed of Trust Note dated June 8, 2006, by and between
              the
              Seawright Holdings, Inc., Palma Collins as Trustee and Charter House,
              LLC.(29)10.23
            Engagement
              letter, by and between Sequence Investment Partners, LLC, and Seawright
              Holdings, Inc.(30)10.24
            Promissory
              Note, by and between Dutchess Private Equities, Fund, L.P. and Seawright
              Holdings, Inc.(31)21
            Subsidiaries
                of the Registrant.(24)32#
            Certification
                of Chief Executive Officer and Treasuer (principal executive officer
                and
                principal financial officer), pursuant to 18 United States Code Section
                1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002,
                as
                filed herewith.


____________________________




#  Filed
      herewith.


(1)
            Incorporated
                by reference from Form 8-K as filed with the SEC on October 24,
                2003.


(2)
            Incorporated
                by reference from exhibit 4(i) of Form 10-QSB as filed with the SEC
                on May
                23, 2005.


(3)
            Incorporated
                by reference from exhibit 4(i) of Amendment No. 1 to the Registration
                Statement on Form SB-2 as filed with the SEC on July 6,
                2001.


(4)
            Incorporated
                by reference from exhibit 4(ii) of Registration Statement on Form
                SB-2 as
                filed with the SEC on March 9,
                2001.


(5)
            Incorporated
                by reference from exhibit 4(iii) of Registration Statement on Form
                SB-2 as
                filed with the SEC on March 9,
                2001.


(6)
            Incorporated
                by reference from exhibit 4(iv) of Registration Statement on Form
                SB-2 as
                filed with the SEC on March 9,
                2001.


(7)
            Incorporated
                by reference from exhibit 4(v) of Registration Statement on Form
                SB-2 as
                filed with the SEC on March 9,
                2001.


(8)
            Incorporated
                by reference from exhibit 4(vi) of Registration Statement on Form
                SB-2 as
                filed with the SEC on March 9,
                2001.


(9)
            Incorporated
                by reference from exhibit 4(vii) of Amendment No. 1 to the Registration
                Statement on Form SB-2 as filed with the SEC on July 6,
                2001.


(10)
            Incorporated
                by reference from exhibit 9 of Registration Statement on Form SB-2
                as
                filed with the SEC on March 9,
                2001.


(11)
            Incorporated
                by reference from exhibit 10(i) of Registration Statement on Form
                SB-2 as
                filed with the SEC on March 9,
                2001.


(12)
            Incorporated
                by reference from exhibit 10(iii) of Registration Statement on Form
                SB-2
                as filed with the SEC on March 9,
                2001.


(13)
            Incorporated
                by reference from exhibit 10(iv) of Amendment No. 5 to the Registration
                Statement on Form SB-2 as filed with the SEC on January 16,
                2002.


(14)
            Incorporated
                by reference from exhibit 10(v) of Amendment No. 1 to the Registration
                Statement on Form SB-2 as filed with the SEC on July 6,
                2001.


(15)
            Incorporated
                by reference from exhibit 10(vi) of Amendment No. 1 to the Registration
                Statement on Form SB-2 as filed with the SEC on July 6,
                2001.


(16)
            Incorporated
                by reference from exhibit 10(vii) of Amendment No. 1 to the Registration
                Statement on Form SB-2 as filed with the SEC on July 6,
                2001.


(17)
            Incorporated
                by reference from exhibit 10 of Form 10-QSB as filed with the SEC
                on
                November 21, 2005.


(18)
            Incorporated
                by reference from Form S-8 POS as filed with the SEC on February
                7,
                2005.


(19)
            Incorporated
                by reference from exhibit 10(i) of Form 10-QSB as filed with the
                SEC on
                May 23, 2005.


(20)
            Incorporated
                by reference from exhibit 10(ii) of Form 10-QSB as filed with the
                SEC on
                May 23, 2005.


(21)
            Incorporated
                by reference from Form 8-K as filed with the SEC on June 2,
                2005.


(22)
            Incorporated
                by reference from Form 8-K as filed with the SEC on June 30,
                2005.


(23)
            Incorporated
                by reference from Form 8-K as filed with the SEC on September 16,
                2005.


(24)
            Incorporated
                by reference from exhibit 21 of Form 10-KSB as filed with the SEC
                on April
                15, 2005. (25)
            Incorporated
              by reference from Form 8-K as filed with the SEC on June 2,
              2006. (26)
            Incorporated
              by reference from Form 8-K as filed with the SEC on September 11,
              2006. (27)
            Incorporated
              by reference from Form 8-K as filed with the SEC on June 15,
              2006. (28)
            Incorporated
              by reference from Form 8-K as filed with the SEC on July 6,
              2006. (29)
            Incorporated
              by reference from Form 8-K as filed with the SEC on October 11,
              2006. (30)
            Incorporated
              by reference from Form 8-K as filed with the SEC on December 11,
              2006. (31)
            Incorporated
              by reference from Form 8-K as filed with the SEC on December 11,
              2006.




33





ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES.





The
      following table sets forth fees billed to the Company by our auditors during
      the
      fiscal years ended December 31, 2006 and 2005 for: (i) services rendered for
      the
      audit of our annual financial statements and the review of our quarterly
      financial statements, (ii) services by our auditor that are reasonably related
      to the performance of the audit or review of our financial statements and that
      are not reported as Audit Fees, (iii) services rendered in connection with
      tax
      compliance, tax advice and tax planning, and (iv) all other fees for services
      rendered.





December
                31, 2006
            
            December
                31, 20051.
                Audit Fees
            
            $
            68,750
            
            $
            50,3502.
                Audit Related Fees
            
            
            --
            
            
            --3.
                Tax Fees
            
            
            --
            
            
            --4.
                All Other Fees
            
            
            --
            
            
            --Total
                Fees
            
            $
            68,750
            
            $
            50,350





Audit
      fees consist of fees billed for professional services rendered for the audit
      of
      the Company's consolidated financial statements and review of the interim
      consolidated financial statements included in quarterly reports and services
      that are normally provided by Russell Bedford Stefanou Mirchandani LLP in
      connection with statutory and regulatory filings or engagements.





Audit-related
      fees consists of fees billed for assurance and related services that are
      reasonably related to the performance of the audit or review of the Company's
      consolidated financial statements, which are not reported under "Audit Fees."





Tax
      fees
      consists of fees billed for professional services for tax compliance, tax advice
      and tax planning.





All
      other
      fees consist of fees for products and services other than the services reported
      above.





Prior
      to
      engaging our accountants to perform a particular service, our board of directors
      obtains an estimate for the service to be performed. All of the services
      described above were approved by the board of directors in accordance with
      its
      procedures





34





SIGNATURES





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.





Date:
      April 17, 2007




Seawright
      Holdings, Inc.


a
      Delaware Corporation





By: /s/
      Joel
      Sens


Joel
      Sens


Title: 
       Chief Executive Officer








In
      accordance with the Securities Exchange Act of 1934, this report has been signed
      by the following persons on behalf of the registrant and in the capacities
      and
      on the dates indicated.





Date:
      April 17, 2007




By: /s/
      Joel
      Sens


Joel
      Sens


Title:  
      Chief Executive Officer,


President,
      Treasurer


(principal
      financial and


accounting
      officer) and


Director





Date:
      April 17, 2007




By: /s/
      Jeffrey
      Sens


Jeffrey Sens


Title: 
      Director





35





























***CONSOLIDATED
      FINANCIAL STATEMENTS***





***YEARS
      ENDED***


***DECEMBER
      31, 2006 AND 2005***














***SEAWRIGHT
      HOLDINGS, INC*** .

























***SEAWRIGHT
      HOLDINGS, INC.***


(A
      DEVELOPMENT STAGE COMPANY)








**INDEX
      TO FINANCIAL STATEMENTS**














**Page**Report
                of Independent Registered Certified Public Accounting Firm
            
            F-3Consolidated
                Balance Sheets as of December 31, 2006 and 2005
            
            F-4-5Consolidated
                Statements of Operations for the Years Ended
              December
                31, 2006 and 2005 and for the Period From Inception
              (October
                14, 1999) Through December 31, 2006
            
            F-6-7Consolidated
                Statements of (Deficiency in) Stockholders' Equity for
              the
                Period From Inception (October 14, 1999) Through
              December
                31, 2006
            
            F-8-11F-12-15Consolidated
                Statements of Cash Flows for the Years Ended
              December
                31, 2006 and 2005 and for the Period From Inception
              (October
                14, 1999) Through December 31, 2006Notes
                to the Consolidated Financial Statements
            
            F-16-34


F-2




RUSSELL
      BEDFORD STEFANOU MIRCHANDANI , LLP


CERTIFIED
      PUBLIC ACCOUNTANTS











REPORT
      OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM








Board
      of
      Directors


Seawright
      Holdings, Inc.


Alexandria,
      VA





We
      have
      audited the accompanying consolidated balance sheets of Seawright Holdings
      Inc.
      and subsidiary, a development stage company, (the “Company”) as of December 31,
      2006 and 2005 and the related consolidated statements of operations, (deficiency
      in) stockholders’ equity, and cash flows for each of the two years in the period
      ended December 31, 2006 and for the period from October 14, 1999 (date of
      inception) to December 31, 2006. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based upon our audits.




We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States of America). Those standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatements. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe our audits
      provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Seawright Holdings Inc.
      and
      subsidiary as of December 31, 2006 and 2005, and the results of its operations
      and its cash flows for each of the two years in the period ended December 31,
      2006, and for the period October 14, 1999 (date of inception) to December 31,
      2006 in conformity with accounting principles generally accepted in the United
      States of America.





As
      discussed in Note A to the consolidated financial statements, the Company
      adopted the provisions of Statement of Financial Accounting Standards No.
      123(R), “Share-Based Payment”, effective January 1, 2006.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As shown in the consolidated financial
      statements, the Company has incurred net losses since its inception. This raises
      substantial doubt about the Company’s ability to continue as a going concern.
      Management’s plans in regard to this matter are described in Note O. The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





/s/
      RUSSELL
      BEDFORD STEFANOU MIRCHANDANI LLP


Russell Bedford Stefanou Mirchandani LLP


Certified
      Public Accountants




McLean,
      Virginia


April
      14,
      2007




F-3





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      BALANCE SHEETS


DECEMBER
      31, 2006 AND 2005







**2006**
            
            **2005**ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            2,986
            
            $
            130,857Marketable
                securities (Note B)
            
            
            17,993
            
            
            138,910Deferred
                financing costs - net (Note D)
            
            
            325,136
            
            
            140,289Deposits
            
            
            65,300
            
            
            125,300Total
                current assets
            
            
            411,415
            
            
            535,356Property
                and equipment - net (Note C)
            
            
            2,110,037
            
            
            1,775,669Deferred
                financing costs - net - less current portion (Note D)
            
            
            226,671
            
            
            366,958Intangible
                asset (Note D)
            
            
            27,343
            
            
            35,156Total
                assets
            
            $
            2,775,466
            
            $
            2,713,139





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-4





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      BALANCE SHEETS (CONTINUED)


DECEMBER
      31, 2006 AND 2005







LIABILITIES
                AND(DEFICIENCY
                IN)STOCKHOLDERS' EQUITY**2006**
            
            **2005**Current
                liabilities:Bank
                overdraft
            
            $
            7,227
            
            $
            -Incentive
                stock liability (Note E)
            
            
            127,500
            
            
            -Accounts
                payable and accrued expenses
            
            
            452,418
            
            
            120,445Note
                payable, current portion (Note E)
            
            
            1,179,950
            
            
            500,000Total
                current liabilities
            
            
            1,767,095
            
            
            620,445Long-term
                liabilitiesNote
                payable - long-term portion (Note E)
            
            
            518,022
            
            
            -Convertible
                notes payable, net of debt discount (Note F)
            
            
            1,190,024
            
            
            1,077,944Other
                long-term liabilities (Note D)
            
            
            34,200
            
            
            30,683Total
                liabilities
            
            
            3,509,341
            
            
            1,729,072Commitment
                and contingencies (Note M)(DEFICIENCY
                IN)STOCKHOLDERS' EQUITYPreferred
                stock, par value $.001 per share;100,000
                shares authorized.
            
            
            -
            
            
            -Series
                A convertible preferred stock, par value$0.001
                per share; 60,000 authorized. (Note G)
            
            
            -
            
            
            -Common
                stock, par value $.001 per share;19,900,000
                shares authorized; 8,935,474 and8,875,476
                shares issued and outstanding atDecember
                31, 2006 and 2005, respectively. (Note G)
            
            
            8,936
            
            
            8,876Additional
                paid-in-capital
            
            
            3,081,760
            
            
            3,014,376Preferred
                stock dividend
            
            
            (25,000
            )
            
            (25,000
            )Accumulated
                deficit during development stage
            
            
            (3,799,571
            )
            
            (2,014,185
            )Total
                (deficiency in) stockholders' equity
            
            
            (733,875
            )
            
            984,067Total
                liabilities and (deficiency in) stockholders' equity
            
            $
            2,775,466
            
            $
            2,713,139





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-5





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF OPERATIONS




**For
                the period from**
              **October
                14, 1999**
              **(date
                of inception)**
              **through**
              **December
                31,****2006**
            
            **2005**
            
            **2006**Sales,
                net
            
            $
            3,304
            
            $
            2,524
            
            $
            5,828Costs
                and expenses:Selling,
                general and administrative
            
            
            1,380,949
            
            
            885,327
            
            
            3,873,792(Gain)
                loss on trading securities
            
            
            1,570
            
            
            54,592
            
            
            (37,356
            )Depreciation
                and amortization
            
            
            10,490
            
            
            6,538
            
            
            17,4451,393,009
            
            
            946,457
            
            
            3,853,881Operating
                loss
            
            
            (1,389,705
            )
            
            (943,933
            )
            
            (3,848,053
            )Other
                income (expense):Other
                income
            
            
            21
            
            
            1,000
            
            
            61,969Gain
                (loss) on fair value adjustment for put agreement
            
            
            -
            
            
            68,752
            
            
            -Gain
                on extinguishment of debt
            
            
            -
            
            
            60,000
            
            
            807,103Interest
                expense, net
            
            
            (395,702
            )
            
            (301,867
            )
            
            (837,491)
            )Total
                other income (expense)
            
            
            (395,681
            )
            
            (172,115
            )
            
            31,581Loss
                from continuing operations before income taxes and discontinued
                operations
            
            
            (1,785,386
            )
            
            (1,116,048
            )
            
            (3,816,472
            )Provision
                for income tax
            
            
            -
            
            
            -
            
            
            -Loss
                from continuing operations beforediscontinued
                operations
            
            
            (1,785,386
            )
            
            (1,116,048
            )
            
            (3,816,472
            )Income
                from discontinued operations
            
            
            -
            
            
            -
            
            
            16,901Net
                loss
            
            
            (1,785,386
            )
            
            (1,116,048
            )
            
            (3,799,571
            )Preferred
                stock dividend
            
            
            -
            
            
            -
            
            
            (25,000
            )Net
                  loss attributable to common shareholders
            
            $
            (1,785,386
            )
            $
            (1,116,048
            )
            $
            (3,824,571
            )Losses
                per common shareContinuing
                operationsBasic
            
            $
            (0.20
            )
            $
            (0.13
            )Assuming
                dilution
            
            $
            (0.20
            )
            $
            (0.13
            )Weighted
                average common shares outstanding
            
            
            9,005,009
            
            
            8,874,462




The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-6





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF (DEFICIENCY IN) SHAREHOLDERS' EQUITY


FOR
      THE
      PERIOD OCTOBER 14, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2006





Preferred
                Shares
            
            Preferred
                Stock Amount
            
            Common
                Shares
            
            Common
                Stock Amount
            
            Additional
                Paid-in Capital
            
            Common
                Stock Subscription
            
            Preferred
                Stock Dividend
            
            Deficit
                Accumulated During Development Stage
            
            TotalNet
                loss
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            (1,291
            )
            $
            (1,291
            )**Balance
                at December 31, 1999**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,291
            )
            
            (1,291
            )Common
                stock issued on September30,
                2000 in exchange for convertibledebt
                at $.50 per share
            
            
            -
            
            
            -
            
            
            78,000
            
            
            78
            
            
            38,922
            
            
            -
            
            
            -
            
            
            -
            
            
            39,000Common
                stock issued on November27,
                2000 in exchange for convertibledebt
                at $.50 per share
            
            
            -
            
            
            -
            
            
            26,000
            
            
            26
            
            
            12,974
            
            
            -
            
            
            -
            
            
            -
            
            
            13,000Net
                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 debtat
                $.50 per share
            
            
            -
            
            
            -
            
            
            174,000
            
            
            174
            
            
            86,826
            
            
            -
            
            
            -
            
            
            -
            
            
            87,000Common
                stock issued on January 2,2001
                to founders in exchange forservices
                rendered at $.001 per share
            
            
            -
            
            
            -
            
            
            5,000,000
            
            
            5,000
            
            
            20
            
            
            -
            
            
            -
            
            
            -
            
            
            5,020Common
                stock issued on January 2,2001
                in exchange for servicesrendered
                at $.50 per share
            
            
            -
            
            
            -
            
            
            90,000
            
            
            90
            
            
            44,910
            
            
            -
            
            
            -
            
            
            -
            
            
            45,000Net
                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
            )




The
        accompanying notes are an integral part of these consolidated financial
        statements.


F-7





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF (DEFICIENCY IN)


SHAREHOLDERS'
      EQUITY (CONTINUED)


FOR
      THE
      PERIOD OCTOBER 14, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2006





Preferred
                Shares
            
            Preferred
                Stock Amount
            
            Common
                Shares
            
            Common
                Stock Amount
            
            Additional
                Paid-in Capital
            
            Common
                Stock Subscription
            
            Preferred
                Stock Dividend
            
            Deficit
                Accumulated During Development Stage
            
            Total**Balance
                at December 31, 2002**
            
            
            -
            
            $
            -
            
            
            5,368,000
            
            $
            5,368
            
            $
            183,652
            
            $
            -
            
            $
            -
            
            $
            (1,073,534
            )
            $
            (884,514
            )Preferred
                stock issued in exchangefor
                cash at $5 per share
            
            
            55,000
            
            
            55
            
            
            -
            
            
            -
            
            
            274,945
            
            
            -
            
            
            -
            
            
            -
            
            
            275,000Stock
                options issued in exchange forservices
                rendered
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,276
            
            
            -
            
            
            -
            
            
            -
            
            
            5,276Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            506,846
            
            
            506,846**Balance
                at December 31, 2003**
            
            
            55,000
            
            $
            55
            
            
            5,368,000
            
            $
            5,368
            
            $
            463,873
            
            $
            -
            
            $
            -
            
            $
            (566,688
            )
            $
            (97,392
            )Preferred
                stock cancelled in exchangefor
                stock options exercised at$.5625
                per share
            
            
            (5,000
            )
            
            (5
            )
            
            160,000
            
            
            160
            
            
            64,845
            
            
            -
            
            
            -
            
            
            -
            
            
            65,000Common
                stock issued on April 8, 2004in
                exchange for cash at $.30 per share
            
            
            -
            
            
            -
            
            
            300,000
            
            
            300
            
            
            89,700
            
            
            -
            
            
            -
            
            
            -
            
            
            90,000Common
                stock issued and subscribedin
                connection with private placement
            
            
            -
            
            
            -
            
            
            2,404,978
            
            
            2,405
            
            
            1,359,491
            
            
            25,581
            
            
            -
            
            
            -
            
            
            1,387,477Conversion
                of preferred stock tocommon
                stock
            
            
            (50,000
            )
            
            (50
            )
            
            500,000
            
            
            500
            
            
            (450
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Preferred
                stock dividend
            
            
            -
            
            
            -
            
            
            50,000
            
            
            50
            
            
            24,950
            
            
            -
            
            
            (25,000
            )
            
            -
            
            
            -Warrants
                issued to consultants inexchange
                for services rendered
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            545,460
            
            
            -
            
            
            -
            
            
            -
            
            
            545,460Beneficial
                conversion feature ofconvertible
                debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            274,499
            
            
            -
            
            
            -
            
            
            -
            
            
            274,499Value
                of warrants attached toconvertible
                debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            187,123
            
            
            -
            
            
            -
            
            
            -
            
            
            187,123Return
                of contributed capital toshareholder
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (144,006
            )
            
            -
            
            
            -
            
            
            -
            
            
            (144,006
            )Reclassification
                of equity to liabilityupon
                issuance of put agreement
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (90,000
            )
            
            
            
            
            
            
            
            
            
            
            (90,000
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (331,449
            )
            
            (331,449
            )**Balance
                at December 31, 2004**
            
            
            -
            
            $
            -
            
            
            8,782,978
            
            $
            8,783
            
            $
            2,775,485
            
            $
            25,581
            
            $
            (25,000
            )
            $
            (898,137
            )
            $
            1,886,712




The
        accompanying notes are an integral part of these consolidated financial
        statements.


F-8


SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF (DEFICIENCY IN)


SHAREHOLDERS'
      EQUITY (CONTINUED)


FOR
      THE
      PERIOD OCTOBER 14, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2006





Preferred
                Shares
            
            Preferred
                Stock Amount
            
            Common
                Shares
            
            Common
                Stock Amount
            
            Additional
                Paid-in Capital
            
            Common
                Stock Subscription
            
            Preferred
                Stock Dividend
            
            Deficit
                Accumulated During Development Stage
            
            Total**Balance
                at December 31, 2004**
            
            
            -
            
            $
            -
            
            
            8,782,978
            
            $
            8,783
            
            $
            2,775,485
            
            $
            25,581
            
            $
            (25,000
            )
            $
            (898,137
            )
            $
            1,886,712Common
                stock issued in connectionwith
                common stock subscribed inconnection
                with private placement
            
            
            -
            
            
            -
            
            
            54,998
            
            
            55
            
            
            25,526
            
            
            (25,581
            )
            
            -
            
            
            -
            
            
            -Common
                stock issued in connectionwith
                private placement
            
            
            -
            
            
            -
            
            
            37,500
            
            
            38
            
            
            25,150
            
            
            -
            
            
            -
            
            
            -
            
            
            25,188Fractional
                share - return of proceeds
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (13
            )
            
            -
            
            
            -
            
            
            -
            
            
            (13
            )Beneficial
                conversion feature ofconvertible
                debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,708
            
            
            -
            
            
            -
            
            
            -
            
            
            5,708Value
                of warrants attached toconvertible
                debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,020
            
            
            -
            
            
            -
            
            
            -
            
            
            3,020Contributed
                capital
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            89,500
            
            
            -
            
            
            -
            
            
            -
            
            
            89,500Expiration
                of put agreement
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            90,000
            
            
            
            
            
            
            
            
            
            
            
            90,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,116,048
            )
            
            (1,116,048
            )**Balance
                at December 31, 2005**
            
            
            -
            
            $
            -
            
            
            8,875,476
            
            $
            8,876
            
            $
            3,014,376
            
            $
            -
            
            $
            (25,000
            )
            $
            (2,014,185
            )
            $
            984,067Common
                stock issued onMay
                1, 2006 in exchange for cash at $0.45 per share
            
            
            -
            
            
            -
            
            
            199,998
            
            
            200
            
            
            89,800
            
            
            -
            
            
            -
            
            
            -
            
            
            90,000Contributed
                capital
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            54,505
            
            
            -
            
            
            -
            
            
            -
            
            
            54,505Stock
                options issued to consultants in exchange for services
                rendered
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            38,490
            
            
            -
            
            
            -
            
            
            -
            
            
            38,490Common
                stock issued on September 1, 2006 in exchange for cash at $0.45 per
                share
            
            
            -
            
            
            -
            
            
            20,000
            
            
            20
            
            
            8,980
            
            
            -
            
            
            -
            
            
            -
            
            
            9,000Return
                of contributed capital to shareholder
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (42,951
            )
            
            -
            
            
            -
            
            
            -
            
            
            (42,951
            )Reacquisition
                and cancellation of shares
            
            
            -
            
            
            -
            
            
            (160,000
            )
            
            (160
            )
            
            (81,440
            )
            
            -
            
            
            -
            
            
            -
            
            
            (81,600
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,785,386
            )
            
            (1,785,386
            )**Balance
                at December 31, 2006**
            
            
            -
            
            $
            -
            
            
            8,935,474
            
            $
            8,936
            
            $
            3,081,760
            
            $
            -
            
            $
            (25,000
            )
            $
            (3,799,571
            )
            $
            (733,875
            )




The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-9





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF CASH FLOWS





**For
                the years ended December 31,**
            
            **For
                the period from**
              **October
                14, 1999**
              **(date
                of inception)**
              **through**
              **December
                31,********2006**
            
            ******2005**
            
            **2006**Net
                loss
            
            $
            (1,785,386
            )
            $
            (1,116,048
            )
            $
            (3,799,571
            )Income
                from discontinued operations
            
            
            -
            
            
            -
            
            
            (16,901
            )(1,785,386
            )
            
            (1,116,048
            )
            
            (3,816,472
            )Adjustments
                to reconcile to net cash from operating activities:Depreciation
                and amortization
            
            
            10,489
            
            
            6,538
            
            
            17,444Amortization
                of debt discount
            
            
            120,819
            
            
            112,083
            
            
            260,677Amortization
                of deferred financing costs
            
            
            165,662
            
            
            141,788
            
            
            359,860Interest
                expense financed through issuance of note payable
            
            
            40,000
            
            
            -
            
            
            40,000Accretion
                of interest on tradename liability
            
            
            3,517
            
            
            1,621
            
            
            5,138Extinguishment
                of debt
            
            
            -
            
            
            (60,000
            )
            
            (807,103
            )Fair
                valuation adjustment - termination agreement
            
            
            -
            
            
            (68,752
            )Financing
                expense attributed to conversion of stock options
              to
                common stock
            
            
            -
            
            
            -
            
            
            1,500Common
                stock issued to founders
            
            
            -
            
            
            -
            
            
            5,020Common
                stock issued in exchange forservices
                rendered
            
            
            -
            
            
            -
            
            
            45,000Stock
                options issued in exchange for servicesrendered
            
            
            38,490
            
            
            -
            
            
            43,766Write-off
                of claimed receivable -discontinued
                operations
            
            
            -
            
            
            -
            
            
            6,000Change
                in:Marketable
                securities - trading
            
            
            120,917
            
            
            1,417,495
            
            
            (17,993
            )Claims
                receivable
            
            
            -
            
            
            -
            
            
            (6,000
            )Capitalized
                financing costs
            
            
            (32,647
            )
            
            -
            
            
            (32,647
            )Deposits
            
            
            60,000
            
            
            (59,600
            )
            
            (65,300
            )Purchase
                of intangible
            
            
            -
            
            
            (10,000
            )
            
            (10,000
            )Bank
                overdraft
            
            
            7,227
            
            
            -
            
            
            7,227Accrued
                expenses
            
            
            331,973
            
            
            45,172
            
            
            1,199,521Net
                cash provided by (used in) continuingoperating
                activities
            
            
            (918,939
            )
            
            410,297
            
            
            (2,764,362
            )Net
                cash provided by discontinued operatingactivities
            
            
            -
            
            
            -
            
            
            16,901Net
                cash from operating activities
            
            
            (918,939
            )
            
            410,297
            
            
            (2,747,461
            )




The
      accompanying notes are an integral part of these
      consolidated financial statements.


F-10





SEAWRIGHT
      HOLDINGS, INC.


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)





**For
                the years ended December 31,******
            
            **For
                the period from**
              **October
                14, 1999**
              **(date
                of inception)**
              **through**
              **December
                31,********2006**
            
            ******2005**
            
            **2006**Cash
                flows from investing activitiesCapital
                expenditures
            
            
            (337,045
            )
            
            (264,346
            )
            
            (915,763
            )Net
                cash from investing activities
            
            
            (337,045
            )
            
            (264,346
            )
            
            (915,763
            )Cash
                flows from financing activitiesProceeds
                from issuance of common stock andstock
                subscription - net of costs and fees
            
            
            99,000
            
            
            25,188
            
            
            1,665,165Nonreciprocal
                (transfer to) receipt from shareholder
            
            
            11,554
            
            
            89,487
            
            
            (42,965
            )Proceeds
                from issuance of notes payable, net of repayments
            
            
            1,099,159
            
            
            -
            
            
            1,238,159Proceeds
                from issuance of convertible notes - net
            
            
            -
            
            
            16,792
            
            
            1,082,586Proceeds
                from issuance of warrants attached to convertible notes - net
            
            
            -
            
            
            3,020
            
            
            169,865Repayments
                of notes payable
            
            
            -
            
            
            (340,000
            )
            
            (640,000
            )Reacquisition
                of shares
            
            
            (81,600
            )
            
            -
            
            
            (81,600
            )Proceeds
                from issuance of preferred stock - net
            
            
            -
            
            
            -
            
            
            275,000Net
                cash from financing activities
            
            
            1,
                128,113
            
            
            (205,513
            )
            
            3,666,210Net
                increase (decrease) in cash and cash equivalents
            
            $
            (127,871
            )
            $
            (59,562
            )
            $
            2,986Cash
                and cash equivalents - beginning of period
            
            
            130,857
            
            
            190,419
            
            
            -Cash
                and cash equivalents - end of period
            
            $
            2,986
            
            $
            130,857
            
            $
            2,986Supplemental
                Disclosures of Cash Flow InformationCash
                paid for interest
            
            $
            346,042
            
            $
            191,130
            
            $
            586,659Cash
                paid for income taxes
            
            $
            -
            
            $
            -
            
            $
            -Capitalized
                financing costs in connection with issuanceof
                note payable
            
            $
            50,075
            
            $
            -
            
            $
            50,075Capitalized
                financing costs in connection with incentive stock
                liability
            
            $
            127,500Notes
                payable issued in connection with capital expenditures
            
            $
            
            
            $
            500,000
            
            $
            1,200,000Warrants
                issued in exchange for financing costs
            
            $
            -
            
            $
            -
            
            $
            545,460





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-11





***Notes
      to Consolidated Financial Statements***


***Years
      Ended December 31, 2006 and 2005***








NOTE
      A-SUMMARY OF ACCOUNTING POLICIES





A
      summary
      of the significant accounting policies applied in the preparation of the
      accompanying consolidated financial statements follows.





BUSINESS
      AND BASIS OF PRESENTATION





Seawright
      Holdings, Inc., (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 7)* and
      is
      seeking to develop a spring water bottling and distribution business. From
      its
      inception through the date of these financial statements, the Company has
      recognized minimal 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 December 31, 2006, the Company has accumulated losses of
      $3,799,571.





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.





REVENUE
      RECOGNITION





For
      revenue from product sales, the Company recognizes revenue in accordance with
      Staff Accounting Bulletin No. 104, *Revenue
      Recognition* (“SAB104”), which superseded Staff Accounting Bulletin No. 101, *Revenue
      Recognition in Financial Statements* (“SAB101”). SAB 101 requires that four basic criteria must be met before revenue
      can be recognized: (1) persuasive evidence of an arrangement exists; (2)
      delivery has occurred; (3) the selling price is fixed and determinable; and
      (4)
      collectibility is reasonably assured. Determination of criteria (3) and (4)
      are
      based on management’s judgments regarding the fixed nature of the selling prices
      of the products delivered and the collectibility of those amounts. Provisions
      for discounts and rebates to customers, estimated returns and allowances, and
      other adjustments are provided for in the same period the related sales are
      recorded. The Company defers any revenue for which the product has not been
      delivered or is subject to refund until such time that the Company and the
      customer jointly determine that the product has been delivered or no refund
      will
      be required. SAB 104 incorporates Emerging Issues Task Force 00-21 (“EITF
      00-21”), *Multiple-Deliverable
      Revenue Arrangements.* EITF
      00-21 addresses accounting for arrangements that may involve the delivery or
      performance of multiple products, services and/or rights to use assets.





USE
      OF
      ESTIMATES





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent liabilities at the date of the financial statements and the reported
      amount of revenue and expenses during the reporting period. Accordingly, actual
      results could differ from those estimates.





CASH
      AND
      CASH EQUIVALENTS





The
      Company maintains a cash balance in a non-interest bearing account that may,
      at
      times, exceed federally insured limits. For the purposes of the statements
      of
      cash flows, the Company considers all highly liquid debt instruments purchased
      with a maturity date of three months or less to be cash
      equivalents.





F-12




PROPERTY
      AND EQUIPMENT





Property
      and equipment are stated at cost. When retired or otherwise disposed, the
      related carrying value and accumulated depreciation are removed from the
      respective accounts and the net difference less any amount realized from
      disposition, is reflected in earnings. Minor additions and renewals are expensed
      in the year incurred. Major additions and renewals are capitalized and
      depreciated over their estimated useful lives being 5 years for equipment and
      4
      years for computers.





ADVERTISING





The
      Company follows the policy of charging the costs of advertising to expense
      as
      incurred. The Company did not incur advertising costs for the past two
      years.





IMPAIRMENT
      OF LONG-LIVED ASSETS





The
      Company has adopted *Statement
      of Financial Accounting Standards No.144, Accounting for the Impairment or
      Disposal of Long-Lived Assets (SFAS 144)* .
      The
      Statement requires that long-lived assets and certain identifiable intangibles
      held and used by the Company be reviewed for impairment whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. Events relating to recoverability may include significant
      unfavorable changes in business conditions, recurring losses, or a forecasted
      inability to achieve break even operating results over an extended period.
      The
      Company evaluates the recoverability of long-lived assets based upon forecasted
      undiscounted cash flows. Should an impairment in value be indicated, the
      carrying value of intangible assets will be adjusted, based on estimates of
      future discounted cash flows resulting from the use of and ultimate disposition
      of the intangible, to be reported at the lower of the carrying amount or the
      fair value less costs to sell.





FAIR
      VALUE OF FINANCIAL INSTRUMENTS





*Statement
      of Financial Accounting Standards No. 107, Disclosures About Fair Value of
      Financial Instruments (SFAS 107)* requires
      disclosure of the fair value of certain financial instruments. The carrying
      value of cash and cash equivalents, accounts receivable, accounts payable and
      short-term borrowings, as reflected in the balance sheets, approximate fair
      value because of the short-term maturity of these instruments.




STOCK
      BASED COMPENSATION





On
      January 1, 2006, the Company adopted the provisions of Statement of Financial
      Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” which
      requires the measurement and recognition of compensation expense for all
      stock-based awards made to employees based on estimated fair values.
      SFAS No. 123(R) supersedes previous accounting under Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees” for periods beginning in fiscal 2006. In March 2005, the SEC issued
      Staff Accounting Bulletin (“SAB”) No. 107, providing supplemental
      implementation guidance for SFAS 123(R). The Company has applied the
      provisions of SAB No. 107 in its adoption of
      SFAS No. 123(R).





SFAS No. 123(R)
      requires companies to estimate the fair value of stock-based awards on the
      date
      of grant using an option pricing model. The value of the portion of the award
      that is ultimately expected to vest is recognized as expense over the requisite
      service periods. The Company adopted SFAS No. 123(R) using the
      modified prospective application, which requires the application of the standard
      starting from January 1, 2006, the first day of the Company’s year. The
      Company’s consolidated financial statements for the year ended December 31,
      2006, reflect the impact, if any, of SFAS No. 123(R).





F-13




Prior
      to
      the adoption of SFAS No. 123(R), the Company accounted for stock-based
      awards to employees using the intrinsic value method in accordance with APB
      No. 25, as allowed under SFAS No. 123, “Accounting for
      Stock-Based Compensation.” Under the intrinsic value method, no stock-based
      compensation expense for employee stock options had been recognized in the
      Company’s consolidated statements of operations because the exercise price of
      the Company’s stock options granted to employees equaled the fair market value
      of the underlying stock at the date of grant. In accordance with the modified
      prospective transition method the Company used in adopting
      SFAS No. 123(R), the Company’s results of operations prior to fiscal
      2006 have not been restated to reflect, and do not include, the impact of
      SFAS No. 123(R).





Stock-based
      compensation expense recognized during a period is based on the value of the
      portion of stock-based awards that is ultimately expected to vest during the
      period.





The
      following table illustrates the pro forma net income and earnings per share
      for
      the year ended December 31, 2005 as if compensation expense for stock options
      issued to employees had been determined consistent with SFAS No. 123:





For
                the year
              ended
              December
                31,
              2005Net
                loss - as reported
            
            $
            (1,116,048
            )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
                loss - Pro Forma
            
            
            (1,116,048
            )Net
                loss attributable to common stockholders - Pro forma
            
            $
            (1,116,048
            )Basic
                (and assuming dilution) loss per share - as reported
            
            $
            (0.13
            )Basic
                (and assuming dilution) loss per share - Pro forma
            
            $
            (0.13
            )





Stock-based
      compensation expense is measured using a multiple point Black-Scholes option
      pricing model that takes into account highly subjective and complex assumptions.
      The expected life of options granted is derived from the vesting period of
      the
      award, as well as historical exercise behavior, and represents the period of
      time that options granted are expected to be outstanding. Expected volatilities
      are based on a blend of historical volatility and implied volatility derived
      from publicly traded options to purchase the Company’s common stock, which the
      Company believes is more reflective of the market conditions and a better
      indicator of expected volatility than solely using historical volatility. The
      risk-free interest rate is the implied yield currently available on
      U.S. Treasury zero-coupon issues with a remaining term equal to the
      expected life of the option. There were no employee options granted during
      2006
      or 2005, and all employee options granted prior to 2005 had fully vested by
      January 1, 2005.





Stock-based
      compensation expense related to 75,000 stock options issued to consultants
      for
      services rendered as recognized under SFAS No. 123(R) totaled $38,490
      for the year ended December 31, 2006 (Note I). As of December 31, 2006, all
      stock options outstanding issued to consultants were fully vested.





F-14





EARNING
      (LOSS) PER SHARE





Net
      earning (loss) per share is provided in accordance with *Statement
      of Financial Accounting Standards No. 128, Earnings per share (SFAS
      128)* .
      Basic
      loss per share is computed by dividing losses available to common stockholders
      by the weighted average number of common shares and dilutive common stock
      equivalents outstanding during the period. Dilutive common stock equivalents
      consist of shares issuable upon conversion of convertible debentures and the
      exercise of the Company's stock options and warrants (calculated using the
      treasury stock method). During the year ended December 31, 2006 and 2005, common
      stock equivalents are not considered in the calculation of the weighted average
      number of common shares outstanding because they would be anti-dilutive, thereby
      decreasing the net loss per common share.





SEGMENT
      INFORMATION





The
      Company adopted *Statement
      of Financial Accounting Standards No. 131, Disclosures about Segments of an
      Enterprise and Related Information (SFAS 131)* in the
      year ended December 31, 1999. SFAS 131 establishes standards for reporting
      information regarding operating segments in annual financial statements and
      requires selected information for those segments to be presented in interim
      financial reports issued to stockholders. SFAS 131 also establishes standards
      for related disclosures about products and services and geographic areas.
      Operating segments are identified as components of an enterprise about which
      separate discrete financial information is available for evaluation by the
      chief
      operating decision maker, or decision-making group, in making decisions
      regarding the allocation of resources and asset performance. The information
      disclosed herein materially represents all of the financial information related
      to the Company's principal operating segment.





INCOME
      TAXES





The
      Company follows *Statement
      of Financial Accounting Standards No. 109, Accounting for Income taxes (SFAS
      109)* for
      recording the provision for income taxes. Deferred tax assets and liabilities
      are computed based upon the difference between the financial statement and
      income tax basis of assets and liabilities using the enacted marginal tax rate
      applicable when the related asset or liability is expected to realized or
      settled. Deferred income tax expenses or benefits are based on the changes
      in
      the asset or liability during each period. If available evidence suggests that
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized, a valuation allowance is required to reduce the deferred
      tax assets to the amount that is more likely than not to be realized. Future
      changes in such valuation allowance are included in the provision for deferred
      income taxes in the period of change.





Deferred
      income taxes may arise from temporary differences resulting from income and
      expense items reported for financial accounting and tax purposes in different
      periods. Deferred taxes are classified as current or non-current, depending
      on
      the classification of assets and liabilities to which they relate. Deferred
      taxes arising from temporary differences that are not related to an asset or
      liability are classified as current or non current depending on the periods
      in
      which the temporary differences are expected to reverse.





CONCENTRATIONS
      OF CREDIT RISK





Financial
      instruments and related items, which potentially subject the Company to
      concentrations of credit risk, consist primarily of cash and cash equivalents
      and marketable securities. The Company places its cash and temporary cash
      investments with high credit quality institutions. At times, such investments
      may be in excess of the FDIC insurance limit. Marketable securities are reviewed
      periodically by management who has established guidelines for the Company’s
      investment portfolio. Marketable securities maintained by the Company are not
      FDIC insured.





F-15





LIQUIDITY





The
      Company is in the development stage and its efforts have been principally
      devoted to developing the spring water bottling and distribution business.
      To
      date, the Company has generated minimal revenues, has incurred expenses and
      has
      sustained losses. As shown in the accompanying consolidated financial
      statements, the Company has incurred accumulated losses of $3,799,571 for the
      period from inception through December 31, 2006. The Company's current
      liabilities exceeded its current assets by $1,355,680 as of December 31, 2006.
      Consequently, its operations are subject to all risks inherent in the
      establishment of a new business enterprise.





DEBT
      AND
      EQUITY SECURITIES





The
      Company follows the provisions of *Statement
      of Financial Accounting Standards No. 115, Accounting for Certain Investments
      in
      Debt and Equity Securities (SFAS 115)* .
      The
      Company classifies debt and equity securities into one of three categories:
      held-to-maturity, available-for-sale or trading. These security classifications
      may be modified after acquisition only under certain specified conditions.
      Securities may be classified as held-to-maturity only if the Company has the
      positive intent and ability to hold them to maturity. Trading securities are
      defined as those bought and held principally for the purpose of selling them
      in
      the near term. All other securities must be classified as
      available-for-sale.





Held-to-maturity
      securities are measured at amortized cost in the consolidated balance sheets.
      Unrealized holding gains and losses are not included in earnings or in a
      separate component of capital. They are merely disclosed in the notes to the
      consolidated financial statements.





Available-for-sale
      securities are carried at fair value on the consolidated balance sheets.
      Unrealized holding gains and losses are not included in earnings but are
      reported as a net amount (less expected tax) in a separate component of capital
      until realized.





Trading
      securities are carried at fair value on the consolidated balance sheets.
      Unrealized holding gains and losses for trading securities are included in
      earnings.





Declines
      in the fair value of held-to-maturity and available-for-sale securities below
      their cost that are deemed to be other than temporary are reflected in earnings
      as realized losses.





INTANGIBLES





In
      accordance with *Statement
      of Financial Accounting Standards No. 142* , *Goodwill
      and Other Intangible Assets (SFAS 142)* ,
      indefinite-lived intangible assets are not amortized but are reviewed annually
      for impairment. Separable intangible assets that are not deemed to have an
      indefinite life are amortized over their useful lives and reviewed for potential
      impairment whenever events or circumstances indicate that carrying amounts
      may
      not be recoverable.





The
      Company tests, for impairment, the tradename value reported on the consolidated
      balance sheet on the last day of the Company’s year. The tradename impairment
      test under SFAS 142 requires a two-step approach, which is performed at the
      reporting unit level, as defined in SFAS 142. Step one identifies potential
      impairments by comparing the fair value of the reporting unit to its carrying
      amount. Step two, which is only performed if there is a potential impairment,
      compares the carrying amount of the reporting unit’s tradename value to its
      implied value, as defined in SFAS 142. If the carrying amount of the reporting
      unit’s tradename exceeds the implied fair value of the tradename, an impairment
      loss is recognized for an amount equal to that excess.





Financing
      costs associated with the Company’s convertible promissory notes are deferred
      and amortized over the term of the loan.





F-16




NEW
      ACCOUNTING PRONOUNCEMENTS





*Currently
      Effective*





In
      December 2004, the Financial Accounting Standards Board issued Statement No.
      123
      (revised 2004), which is a revision of Statement 123 “Accounting for Stock-Based
      Compensation.” This Statement establishes standards for the accounting for
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. It also addresses transactions in which an entity incurs liabilities
      in exchange for goods or services that are based on the fair value of the
      entity’s equity instruments or that may be settled by the issuance of those
      equity instruments. This Statement focuses primarily on accounting for
      transactions in which an entity obtains employee services in share-based payment
      transactions. This Statement is effective for public entities as of the
      beginning of the first interim or annual reporting period that begins after
      December 15, 2005. The adoption of this Statement did not have a material effect
      on the Company’s financial condition, results of operations, or cash
      flows.





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standard (“SFAS”) No. 154, “Accounting Changes and
      Error Corrections,” which changes the accounting for and reporting of a change
      in accounting principle. This statement applies to all voluntary changes in
      accounting principles and changes required by an accounting pronouncement in
      the
      unusual instance that the pronouncement does not include specific transition
      provisions. This statement requires retrospective application to prior period
      financial statements of changes in accounting principle, unless it is
      impractical to determine either the period-specific or cumulative effects of
      the
      change. SFAS 154 is effective for accounting changes made in fiscal years
      beginning after December 15, 2005. The adoption of this standard did not
      have a material effect on the Company’s financial condition, results of
      operations, or cash flows.





In
      November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and 124-1, *The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments* .
      The
      guidance in this FSP addresses the determination of when an investment is
      considered impaired, whether that impairment is other than temporary, and the
      measurement of an impairment loss. The FSP also includes accounting
      considerations subsequent to the recognition of other-than temporary impairment
      and requires certain disclosures about unrealized losses that have not been
      recognized as other-than-temporary impairments. The guidance in this FSP is
      required to be applied to reporting periods beginning after December 15, 2005.
      Earlier application is permitted, but the Company did not adopt the recognition
      provisions of this standard until January 1, 2006. The disclosure provisions
      were adopted in previous years. The adoption of this Statement did not have
      a
      material effect on the Company’s financial condition, results of operations or
      cash flows.





In
      September 2006, the Securities and Exchange Commission (the “SEC”) released
      Staff Accounting Bulletin No. 108 (“SAB 108”), which provides detail in the
      quantification and correction of financial statement misstatements. SAB 108
      specifies that companies should apply a combination of the “rollover” and “iron
      curtain” methodologies when making determinations of materiality. The rollover
      method quantifies a misstatement based on the amount of the error originating
      in
      the current year income statement. The iron curtain approach quantifies
      misstatements based on the effects of correcting the misstatement existing
      in
      the balance sheet at the end of the current year, regardless of the year(s)
      of
      origination. SAB 108 instructs companies to quantify the misstatement under
      both
      methodologies and, if either method results in the determination of a material
      error, the Company must adjust its financial statements to correct the error.
      SAB 108 also reminds preparers that a change from an accounting principle that
      is not generally accepted to a principle that is generally accepted is a
      correction of an error. The Bulletin is effective for annual financial
      statements covering the first fiscal year ending after November 15, 2006.
      The adoption of this Bulletin did not have a material effect on the Company’s
      financial condition or results of operations.





F-17





Currently
      Effective in Future
      Years





On
      February 16, 2006 the FASB issued SFAS 155, “Accounting for Certain Hybrid
      Instruments,” which amends SFAS 133, “Accounting for Derivative Instruments and
      Hedging Activities,” and SFAS 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities.” SFAS 155 allows financial
      instruments that have embedded derivatives to be accounted for as a whole
      (eliminating the need to bifurcate the derivative from its host) if the holder
      elects to account for the whole instrument on a fair value basis. SFAS 155
      also
      clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
      statement is effective for all financial instruments acquired or issued in
      fiscal years beginning after September 15, 2006. The Company does not
      expect its adoption of this new standard to have a material impact on its
      financial position, results of operations or cash flows.





In
      July
      2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for
      Uncertainty in Income Taxes—an interpretation of FASB Statement 109”, which
      provides guidance on the measurement, recognition, and disclosure of tax
      positions taken or expected to be taken in a tax return. The interpretation
      also
      provides guidance on derecognition, classification, interest and penalties,
      and
      disclosure. FIN 48 prescribes that a tax position should only be recognized
      if
      it is more-likely-than-not that the position will be sustained upon examination
      by the appropriate taxing authority. A tax position that meets this threshold
      is
      measured as the largest amount of benefit that is greater than 50 percent likely
      of being realized upon ultimate settlement. The cumulative effect of applying
      FIN 48 is to be reported as an adjustment to the beginning balance of retained
      earnings in the period of adoption. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. The company is assessing the impact, if
      any, that the adoption may have on its financial statements.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after September 15, 2006. The Company does not
      expect its adoption of this new standard to have a material impact on its
      financial position, results of operations or cash flows.





In
      September 2006, the FASB issued SFAS 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (“GAAP”), and expands disclosures about
      fair value measurements. The Company will be required to adopt SFAS 157
      effective for the fiscal year beginning January 1, 2008. The requirements
      of SFAS 157 will be applied prospectively except for certain derivative
      instruments that would be adjusted through the opening balance of retained
      earnings in the period of adoption. The Company is currently evaluating the
      impact of the adoption of SFAS 157 on the Company’s consolidated financial
      statements and the management believes that the adoption of SFAS 157 will not
      have a significant impact on its consolidated results of operations or financial
      position.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132R* (‘SFAS
      158’).  SFAS 158 changes current practice by requiring employers to
      recognize the overfunded or underfunded positions of defined benefit
      postretirement plans, including pension plans, on the balance sheet.  The
      funded status is defined as the difference between the projected benefit
      obligation and the fair value of plan assets.  SFAS 158 also requires
      employers to recognize the change in funded status in other comprehensive income
      (a component of shareholders’ equity).  SFAS 158 does not change the
      requirements for the measurement and recognition of pension expense in the
      statement of income.  SFAS 158 is effective for fiscal years ending after
      December 15, 2006.  The Company does not anticipate any material impact to
      its financial condition or results of operations as a result of the adoption
      of
      SFAS 158.





F-18





In
      September 2006, the FASB ratified the consensus reached by the EITF on Issue
      No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit
      Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” EITF 06-4
      requires the recognition of a liability and related compensation costs for
      endorsement split-dollar life insurance policies that provide a benefit to
      an
      employee that extends to postretirement periods as defined in SFAS No. 106,
“ Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The
      EITF reached a consensus that “Company Owned Life Insurance” policies purchased
      for this purpose do not effectively settle the entity’s obligation to the
      employee in this regard, and thus the entity must record compensation cost
      and a
      related liability. Entities should recognize the effects of applying this Issue
      through either, (a) a change in accounting principle through a
      cumulative-effect adjustment to retained earnings or to other components of
      equity or net assets in the balance sheet as of the beginning of the year of
      adoption, or (b) a change in accounting principle through retrospective
      application to all prior periods. This Issue is effective for fiscal years
      beginning after December 15, 2007. The Company is assessing the impact, if
      any, that adoption may have on its financial statements.


In
        December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
        Payment Arrangements (" FSP
        00-19 -2")
        which addresses accounting for registration payment arrangements. FSP
        00-19 -2
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement, whether
        issued
        as a separate agreement or included as a provision of a financial instrument
        or
        other agreement, should be separately recognized and measured in accordance
        with
        FASB Statement No. 5, Accounting for Contingencies. FSP
        00-19 -2
        further clarifies that a financial instrument subject to a registration payment
        arrangement should be accounted for in accordance with other applicable
        generally accepted accounting principles without regard to the contingent
        obligation to transfer consideration pursuant to the registration payment
        arrangement. For registration payment arrangements and financial instruments
        subject to those arrangements that were entered into prior to the issuance
        of
        EITF 00-19-2, this guidance is effective for financial statements issued
        for
        fiscal years beginning after December 15, 2006 and interim periods within
        those
        fiscal years. The adoption of FSP 00-19-2 is not expected to have a material
        impact on the Company’s financial condition or results of
        operations.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS
      159
      permits entities to choose to measure many financial instruments, and certain
      other items, at fair value. SFAS
      159
      applies to reporting periods beginning after November 15, 2007. The adoption
      of
      SFAS 159 is not expected to have a material impact on the Company’s financial
      condition or results of operations.





RECLASSIFICATIONS





Certain
      reclassifications have been made in prior year’s financial statements to conform
      to classifications used in the current year.





NOTE
      B -
      MARKETABLE SECURITIES





During
      the year ended December 31, 2006 and 2005, the Company classified all of its
      marketable securities as trading as the securities were bought and held
      principally for the purpose of selling them in the near term. The Company
      actively and frequently trades securities with the objective of generating
      profits on short-term differences in price. The trading securities are marked
      to
      market on a monthly basis. At December 31, 2006 and 2005, the Company's trading
      securities were carried at fair values of $17,993 and $138,910, respectively.
      The Company included a realized net loss of $1,570, a net loss of $54,592,
      and a
      net gain of $37,356 on trading securities during the years ended December 31,
      2006 and 2005, and for the period from October 14, 1999 (date of inception)
      through December 31, 2006, respectively.




NOTE
      C -
      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. In June 2005,
        the
        Company purchased a parcel of land located approximately 10 miles south of
        the
        Augusta County, Virginia location. The purchased parcel is 33.52 acres which
        the
        Company acquired for $725,000, comprised of $225,000 of cash and a $500,000
        promissory note payable. The Company anticipates entering the sale of bulk
        spring water and retail bottling business utilizing the properties’ water
        resources. The Company also completed the purchase of the second Staunton,
        Virginia property on April 10, 2006. The purchase price for the second property
        was $240,000, less a previously made $10,000 refundable deposit. The Company
        paid $90,000 of the remaining purchase price at settlement and has financed
        the
        remaining $140,000.




F-19




Major
      classes of property and equipment at December 31,
      2006 and 2005 consisted of the following:




2006
            
            2005Land
            
            $
            1,965,000
            
            $
            1,725,000Equipment
            
            
            32,167
            
            
            29,438Building
                improvements
            
            
            118,595
            
            
            24,2802,115,762
            
            
            1,778,718Less
                - accumulated depreciation
            
            
            (5,725
            )
            
            (3,049
            )$
            2,110,037
            
            $
            1,775,669





Depreciation
      expense was $2,676 and $2,632 for the years ended December 31, 2006 and 2005,
      respectively. The building improvements have not been placed in service as
      of
      December 31, 2006. Accordingly, depreciation has not been recorded on this
      asset
      group.





NOTE
      D -
      INTANGIBLES





INTANGIBLE
      ASSET





In
      June
      2005, the Company purchased intellectual property including trademarks, service
      marks, trade dress, trade names, brand names, designs and logos as well as
      formulas for flavored sparkling waters and teas from a competitor. Under the
      terms of the agreement, the Company paid a purchase price of $10,000 with
      royalties to be paid for the first 4,000,000 cases of bottled water or tea
      sold
      under the trademarks. As of the fifth anniversary of the effective date of
      the
      purchase, if the Company has not sold 4,000,000 cases of product under the
      trademark, the seller shall be entitled to a payment of $50,000 less any
      royalties previously paid under the agreement. The royalty payable under this
      intangible has been recorded at its present value of $34,200 at December 31,
      2006 and is included in other long-term liabilities. The intangibles have been
      recorded at the carrying amount of $27,343 net of the discount amortized and
      charged to interest expense in relation to these intangibles through December
      31, 2006 of $11,719. The intangible assets acquired will be amortized over
      a
      period of 5 years.





The
      Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby
      the Company periodically tests its intangible assets for impairment. On an
      annual basis, and when there is reason to suspect that their values have been
      diminished or impaired, these assets are tested for impairment, and write-downs
      will be included in results from operations.




Estimated
      amortization expense is as follows for years ending December 31:




2007
            
            $
            7,8122008
            
            
            7,8122009
            
            
            7,8122010
            
            
            3,9072011
            
            
            -Thereafter
            
            
            -Total
            
            $
            27,343





F-20





DEFERRED
      FINANCING COSTS





Deferred
      financing costs associated with the Company’s convertible and various notes
      payable are deferred and amortized over the life of the loan. Deferred financing
      costs consisted of the following at December 31:




2006
            
            2005Deferred
                financing costs
            
            $
            911,667
            
            $
            701,445Less
                - accumulated amortization
            
            
            (359,860
            )
            
            (194,198
            )551,807
            
            
            507,247Less
                - current portion
            
            
            (293,941
            )
            
            (140,289
            )Deferred
                financing costs - long-term
            
            $
            257,866
            
            $
            366,958




Amortization
      expense on deferred financing costs was $165,662 and $141,788 as of December
      31,
      2006 and 2005, respectively.





NOTE
      E -
      NOTES PAYABLE





Notes
      payable at December 31 consisted of the following:




2006
            
            2005Note
                payable, 8% interest, principal and outstanding interest due and
                payable
                in May 2006, collateralized by land.
            
            $
            -
            
            $
            500,0009.375
                % note payable, monthly payments of $4,592 with remaining principal
                and
                outstanding interest due and payable June 2009,
              collateralized
                by land.
            
            
            524,236
            
            
            -15%
                note payable, monthly interest payments, principal due June 2007,
                collateralized by land.
            
            
            515,000
            
            
            -35%
                note payable, monthly principal and interest payments of $65,000,
                maturing
                in December 2007, collateralized by signed put notices.
            
            
            658,736
            
            
            -1,697,972
            
            
            500,000Less
                - current portion
            
            
            (1,179,950)
            
            
            (500,000
            )Notes
                payable - long-term
            
            $
            518,022
            
            $
            -




Aggregate
      maturities of long-term debt as of December 31, 206 are as follows:




Fiscal
                  Year2007
              
              $
              1,179,9502008
              
              
              55,0982009
              
              
              462,9242010
              
              
              -2011
                  and after
              
              
              -$
              1,697,972




During
      June 2006, the Company obtained a $525,000 loan, which is secured by the Mt.
      Sidney property. The Company’s President absolutely and unconditionally
      guaranteed the loan on behalf of the Company. By the terms of this second loan,
      the Company promised to pay to the lender the principal amount of $525,000
      together with interest at a rate of 9.375% per annum on the unpaid principal
      balance of the loan. The loan requires 35 regular installments of $4,592 each
      and one balloon payment equal to the remaining principal balance of the loan,
      accrued interest, and other applicable fees, costs and charges, due in June
      2009. This loan was obtained to pay off a promissory note issued in May 2005
      in
      the amount of $500,000 and a portion of the accrued interest in the amount
      of
      $25,000 in connection with the promissory note. The remaining accrued interest
      in connection with this promissory note and related fees and penalties were
      also
      paid off in cash during the year ended December 31, 2006.





F-21





During
      2006, the Company obtained two interest-only mortgage loans totaling $515,000
      in
      regard to its Mt. Sidney property. The loans bear interest at a fixed rate
      of
      15.00% per annum, require monthly installments of interest throughout their
      terms with a balloon payment, equal to the principal balance of the loans,
      due
      in June 2007.





During
      December 2006, the Company entered into a promissory note with a face amount
      of
      $780,000. Under the terms of the note, the Company received $650,000 less
      closing costs of $50,075 creating a calculated effective interest rate of 35%.
      As a further incentive, the Company agreed to issue 250,000 shares of its common
      stock to the holder of the promissory note. The fair value of the shares,
      $127,500, has been accounted for as deferred financing costs to be amortized
      over the life of the note. An incentive stock liability was recorded to account
      for the Company’s obligation at year end 2006. As detailed in the agreement, the
      Company shall make payments to the holder in the amount of the greater of (a)
      100% of each Put (as defined in the investment agreement detailed in Note N)
      given to the investor from the Company or (b) made in 12 monthly increments
      of
      $65,000. The agreement is collateralized by signed put notices as well as the
      personal property of the President and Chief Executive Officer of the Company.
      The Company is required to abide by certain covenants as detailed in the
      promissory note. As the promissory note is neither a mandatorily redeemable
      financial instrument or a forward contract, the obligation was recorded as
      a
      liability and measured in accordance with FASB 150 at its fair
      value.








NOTE
      F -
      PRIVATE PLACEMENT AND CONVERTIBLE PROMISSORY NOTES PAYABLE





The
      Company entered into a Private Placement Memorandum in August 2004 to offer
      up
      to 1,000 units of an equity/notes payable instrument. Each unit consists of
      2,500 shares of common stock of the Company, $1,500 of convertible promissory
      notes (Convertible Notes), and 1 warrant to purchase 300 shares of the Company's
      common stock at $0.85 per share. The Convertible Notes accrue interest at 11%
      per annum which is payable and due in September 2009. The note holders have
      the
      option to convert any unpaid note principal and accrued interest to the
      Company's common stock at a rate of $0.85 per share anytime after six months
      from the issuance date of the note.





As
      of
      December 31, 2005, the Company had received proceeds of $2,665,116, net of
      placement costs and fees of $331,884, for 999 units subscribed. Pursuant to
      the
      terms of the Private Placement Memorandum, the Company issued to the investors
      Convertible Notes in an aggregate of $1,498,500. The Company is obligated to
      issue 2,497,500 shares of its common stock, valued at $1,563,376, to the
      investors in connection with the private placement. The Company also issued
      to
      investors an aggregate of 999 warrants to purchase 299,700 shares of common
      stock as of December 31, 2005.





A
      summary
      of convertible promissory notes payable at December 31 are as
      follows:




2006
            
            2005Convertible
                notes payable (Convertible Notes), 11% perannum,
                maturity of September 2009, note holder hasthe
                option to convert unpaid note principal and interestto
                the Company's common stock at $0.85 per share
            
            $
            1,498,500
            
            $
            1,498,500Debt
                discount - note, net of accumulated amortizationof
                and $125,970 and $69,929 at December 31, 2006 and2005,
                respectively.
            
            
            (154,238
            )
            
            (210,278
            )Debt
                discount - beneficial conversion feature - note, netof
                accumulated amortization of $125,970 and $69,929at
                December 31, 2006 and 2005, respectively.
            
            
            (154,238
            )
            
            (210,278
            )1,190,024
            
            
            1,077,944Less
                - current portion
            
            
            -
            
            
            -Total
            
            $
            1,190,024
            
            $
            1,077,944




F-22





In
      accordance with *Emerging
      Issues Task Force Issue 98-5, Accounting For Convertible Securities With a
      Beneficial Conversion Feature or Contingently Adjustable Conversion Ratios
      (EITF
      98-5)* ,
      the
      Company allocated, on a relative fair value basis, the net proceeds amongst
      the
      common stock, convertible notes and warrants issued to the investors. As of
      December 31, 2005, the Company recognized a discount to the notes in the amount
      of $280,207. The note discount is being amortized over the maturity period
      of
      the notes, being five years. As of December 31, 2005, the Company had recognized
      a total of $280,207 of the proceeds, which is equal to the intrinsic value
      of
      the imbedded beneficial conversion feature, to additional paid-in capital and
      a
      discount against the Convertible Note. The debt discount attributed to the
      beneficial conversion feature is amortized over the Convertible Notes’ maturity
      period, being five years, as interest expense.





In
      connection with the placement of the Convertible Notes, the Company issued
      detachable warrants granting the holders the right to acquire a total of 299,700
      shares of the Company’s common stock at $0.85 per share as of December 31, 2005.
      The warrants expire five years from their issuance. As of December 31, 2005,
      the
      Company had recognized the value attributable to the warrants, being $190,143,
      to additional paid-in capital in accordance with *Emerging
      Issues Task Force Issue 00-27, Application of Issue No. 98-5 to Certain
      Convertible Instruments (EITF 00-27).* The
      Company valued the warrants in accordance with EITF 00-27 using the
      Black-Scholes pricing model and the following assumptions: contractual terms
      of
      5 years, an average risk free interest rate of 3.38%, a dividend yield of 0%,
      and volatility of 296%.




The
      Company amortized the Convertible Notes’ debt discount and the debt discount
      attributed to the beneficial conversion feature and recorded non-cash interest
      expense of $112,083 for the years ended December 31, 2006 and 2005.




Financing
      costs attributable to the equity portion of the private placement totaled
      $175,899 and were netted against the amount attributable to common stock.
      Deferred financing costs of $155,985 attributable to the debt portion of the
      private placement are being amortized over the life of the debt instrument,
      being 5 years. The Company amortized $31,197 for the years ended December 31,
      2006 and 2005, in relation to the deferred financing costs.








NOTE
      G -
      COMMON 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 December 31, 2006 and 2005, the Company
      does
      not have any 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 December 31, 2006 and 2005, there were
      8,935,474 and 8,875,476 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.





F-23





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,
      net
      of costs and fees.





The
      Series A Convertible Preferred Stock 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 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 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
      declared but unpaid dividends on such shares.





The
      fair
      value of the Company's common stock at the time the conversion option was
      granted was below the value of the Preferred Stock if converted. Accordingly,
      the Company recognized no beneficial conversion feature embedded in the Series
      A
      Preferred Stock.





In
      April
      2004, the Company issued 160,000 shares of its common stock to a shareholder
      in
      exchange for previously issued stock options exercised at $.5625 per share,
      for
      a total of $90,000. In exchange for the shares, the holder of the options 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 remaining balance of $1,500
      was accounted for as financing expenses and was charged to operations during
      the
      year ended December 31, 2004. The preferred shares tendered were subsequently
      cancelled by the Company.





In
      April
      2004, the Company issued an aggregate of 300,000 shares of its restricted common
      stock to an investor in exchange for $90,000 of proceeds, net of costs and
      fees.





Pursuant
      to the Private Placement Memorandum, the Company was obligated to issue an
      aggregate of 2,460,000 shares of its common stock, valued at $1,387,477 net
      of
      placement costs attributable to the equity portion of the private placement,
      to
      the investors in connection with 984 units sold in the private placement as
      of
      December 31, 2004. The Company has issued an aggregate of 2,404,978 shares
      to
      the investors at December 31, 2004, and the remaining aggregate of 54,998 shares
      were issued to the investors in January 2005 (fractional shares of 24 shares
      of
      common stock will not be issued). The Company has accounted for the shares
      not
      issued at December 31, 2004 as common stock subscription payable in the amount
      of $25,581.





F-24





In
      December 2004, the Company's Series A Preferred Stock holders elected to convert
      an aggregate of 50,000 sharers of Preferred Stock into 500,000 shares of the
      Company's common stock, at a ratio of ten (10) shares of common stock for each
      share of preferred stock. In connection with the conversion, the Company also
      issued an aggregate of 50,000 shares of its common stock in exchange for $25,000
      of dividends in arrears. As of December 31, 2004, all Series A Convertible
      Preferred Stock has been converted to the Company's common stock, and there
      was
      no Preferred Stock issued and outstanding at December 31, 2004.





In
      January 2005, pursuant to the Private Placement Memorandum, the Company was
      obligated to issue an aggregate of 37,500 shares of its common stock, valued
      at
      $25,188 to the investors in connection with 15 units sold in the private
      placement as of December 31, 2005.





During
      the year ended 2006, the Company issued an aggregate of 219,998 shares of common
      stock in exchange for $99,000 of proceeds, net of costs and fees.





In
      December 2006, the Company repurchased 160,000 shares of common stock from
      a
      former employee for $1.25 per share. In accordance with FASB Technical Bulletin
      85-6, the amount paid per share was considered to be significantly in excess
      of
      the current market price of $0.51 per share thereby creating a presumption
      that
      the purchase price is not attributable to the stock value alone. As such, the
      excess amount of $0.74 per share is deemed to be attributable to a severance
      payment and $118,400 was charged to compensation expense in 2006. The shares
      were retired by the Company immediately after repurchase.








NOTE
      H -
      TERMINATION AGREEMENT





In
      April
      2004, the Company issued 160,000 shares of its common stock to a shareholder
      in
      exchange for previously issued stock options exercised at $.5625 per share,
      for
      a total of $90,000. In exchange for the shares, the holder of the options 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 remaining balance of $1,500
      was accounted for as financing expense and was charged to operations during
      the
      year ended December 31, 2004.





In
      October 2004, the Company entered into an agreement (termination agreement)
      granting the shareholder an option to put the 160,000 shares of common stock
      to
      the Company one year from the date of the agreement for $1.25 per share. The
      shareholder agreed to cancel 677,500 stock options exercisable at $.5625 per
      share.





The
      Company accounted for the puts in accordance with *Statement
      of Financial Accounting Standards No. 150, Accounting for Certain Financial
      Instruments with Characteristics of both Liabilities and Equity (SFAS
      150)* ,
      and
      classified the fair value attributable to the put option as an accrued
      liability, as the puts issued under the termination agreement embody an
      obligation to repurchase the Company's equity shares which would require the
      Company to settle the agreement by transferring its assets. The put option
      was
      initially measured at its fair value of $170,256 as of the date of the
      agreement.





Assumptions
      used to estimate the fair value of the put option are as follows:





Risk-free
                interest rate
            
            
            3.38%Dividend
                yield
            
            
            -Volatility
            
            
            296%Time
                to expiration
            
            
            1
                year





Equity
      was reduced by the original value of the shares, being $90,000, with the
      remaining value of $80,256 being charged to other expense.





F-25




In
      October 2005, the termination agreement and puts expired without being
      exercised. At the time of expiration, the fair value of the accrued liability
      attributable to the puts was $87,984. Accordingly, equity has been increased
      by
      the original value of the shares, being $90,000, with the remaining value of
      $2,016 being charged to other expense.





NOTE
      I -
      STOCK OPTIONS AND WARRANTS





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’s
      Chief Executive Officer. These options were granted in lieu of cash compensation
      for services performed or other consideration.








Options
                Outstanding
            
            Options
                ExercisableExercise
              Price
            
            
            Number
              Outstanding
            
            
            Weighted
                Average Contractual Life
              (Years)
            
            
            Weighted
                Average Exercise Price
            
            
            Numbers
              Exercisable
            
            
            Average
              Exercise
                Price$
                0.50 - 2.00
            
            
            1,575,000
            
            
            3.84
            
            $
            1.33
            
            
            1,575,000
            
            $
            1.33





Transactions
      involving options issued to employees and consultants during 2006 and 2005
      are
      summarized as follows:




Number
                of
              Shares
            
            
            Weighted
              Average
                Price
              Per
                ShareOutstanding
                at December 31, 2004
            
            
            1,500,000
            
            
            1.35Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Cancelled
                or expired
            
            
            -
            
            
            -Outstanding
                at December 31, 2005
            
            
            1,500,000
            
            $
            1.35Granted
            
            
            75,000
            
            
            0.85Exercised
            
            
            -
            
            
            -Cancelled
                or expired
            
            
            -
            
            
            -Outstanding
                at December 31, 2006
            
            
            1,575,000
            
            $
            1.33





The
      estimated value of the compensatory options granted to a consultant in exchange
      for services rendered was determined using the Black-Scholes pricing model
      and
      the following assumptions: contractual term of 4 years, a risk free interest
      rate of 4.875%, a dividend yield of 0% and volatility of 111%. The Company
      charged $38,490 to operations in connection with these options during the year
      ended December 31, 2006.





F-26





WARRANTS





In
      connection with the Company’s Private Placement (Note F) the Company granted an
      aggregate of 999 warrants to investors, each exercisable for 300 shares of
      common stock Additionally, the Company granted 594,000 warrants to a placement
      agent in exchange for services. Each warrant will be exercisable for one share
      of the Company's common stock.





The
      following table summarizes the changes in warrants outstanding and the related
      prices for the shares of the Company's common stock.







Warrants Outstanding
            
            Warrants
                ExercisableExercise
              Price
            
            
            Number
              Outstanding
            
            
            Weighted
                Average Contractual Life
              (Years)
            
            
            Weighted
                Average Exercise Price
            
            
            Numbers
              Exercisable
            
            
            Average
              Exercise
                Price$
                0.85
            
            
            594,999
            
            
            2.69
            
            $
            0.85
            
            
            594,999
            
            $
            0.85




Transactions
      involving warrants issued to investors and consultants are summarized as
      follows:




Number
                of
              common
                shares
              issuable
                upon
              exercise
                of warrants
            
            Weighted
              Average
                Price
              Per
                ShareOutstanding
                at December 31, 2004
            
            
            889,200
            
            
            0.85Granted
            
            
            4,500
            
            
            0.85Exercised
            
            
            -
            
            
            -Cancelled
                or expired
            
            
            -
            
            
            -Outstanding
                at December 31, 2005
            
            
            893,700
            
            $
            0.85GrantedExercised
            
            
            -
            
            
            -Cancelled
                or expired
            
            
            -
            
            
            -Outstanding
                at December 31, 2006
            
            
            893,700
            
            $
            0.85





F-27





The
      estimated value of the compensatory warrants granted to the Company's placement
      agent in exchange for services rendered was determined using the Black-Scholes
      pricing model and the following assumptions: contractual term of 5 years, a
      risk
      free interest rate of 3.38%, a dividend yield of 0% and volatility of 291%.
      The
      Company capitalized financing costs of $545,460 and the financing costs were
      amortized over the contractual terms (five years) of the convertible debenture.
      During the year ended December 31, 2006 and 2005, the Company amortized
      financing costs and charged $109,092 and $110,591, respectively, to
      operations.








NOTE
      J -
      RELATED PARTY TRANSACTIONS





The
      Company’s President had advanced funds to the Company for working capital
      purposes. The Company had paid in full the amount due to the Company’s President
      during the years ended December 31, 2004. Additionally, the total payment the
      Company remitted exceeded the total balance due to the Company’s President in
      the amount of $42,951, $50,500 and $144,006 during the years ended December
      31,
      2006, 2005 and 2004, respectively. The Company has accounted for the excess
      payments to the Company’s President as a nonreciprocal transfer to a shareholder
      for 2006, 2005 and 2004 and, accordingly, has reflected the overpayment as
      a
      direct reduction of additional paid-in capital.





During
      2005, the Company’s President contributed capital of $140,000 to the Company in
      direct response to the excess payment. The Company has accounted for the net
      contribution of $89,500 as an addition to paid-in capital.





During
      2006, the Company’s President contributed capital of $54,505 to the Company in
      direct response to the excess payment. The Company has accounted for the
      contribution as an addition to paid-in capital.





The
      Company’s director, Ronald L. Attkisson, is also the principal stockholder of
      Jones, Byrd and Attkisson, which, from August 2004 until February 2005, acted
      as
      placement agent for the Company’s private placement. In connection with its role
      as placement agent, Jones, Byrd and Attkisson received a fee of $299,700 and
      was
      issued 594,000 warrants exercisable for 594,000 shares of our common stock
      at
      $0.85 per share (Note F and Note I). Jones, Byrd and Attkisson is also acting
      as
      placement agent under the investment agreement with regard to the equity line
      of
      credit. Under our placement agent agreement for the equity line of credit (Note
      N), we agreed to pay Jones, Byrd and Attkisson 1% of the gross proceeds from
      each put exercised under the investment agreement. Subsequent to the date of
      financial statements, Ronald Attkisson resigned as a director of the Company.








NOTE
      K -
      EARNINGS PER SHARE




**2006**Income
              (Numerator)
            
            Shares
              (Denominator)
            
            Per-share
              AmountLoss
                available to common shareholders
            
            $
            (1,785,386
            )Basic
                and fully diluted loss per share
            
            $
            (1,785,386
            )
            
            9,005,009
            
            $
            (0.20
            )**2005**Loss
                available to common shareholders
            
            $
            (1,116,048
            )Basic
                and fully diluted loss per share
            
            $
            (1,116,048
            )
            
            8,874,462
            
            $
            (0.13
            )





F-28





Options
      to purchase 1,575,000 shares of common stock at $1.33 per share outstanding
      during 2006 and as well as options to purchase 1,500,000 shares of common stock
      at $1.35 per share outstanding during 2005 were not included in the computation
      of diluted earnings per share due to their anti-dilutive effect on earnings
      per
      share. The options to purchase 1,575,000 shares of common stock were still
      outstanding at the end of year 2006.





Warrants
      to purchase 893,700 shares of common stock at $0.85 per share were outstanding
      at December 31, 2006 and 2005, and were not included in the computation of
      diluted earnings per share due to their anti-dilutive effect on earnings per
      share.





Convertible
      notes with the option to purchase 1,762,942 shares of common stock at $0.85
      per
      share were outstanding at December 31, 2006 and 2005, and were not included
      in
      the computation of diluted earnings per share due to their anti-dilutive effect
      on earnings per share.








NOTE
      L -
      INCOME TAXES





The
      Company has adopted SFAS 109, which requires the recognition of deferred tax
      liabilities and assets for the expected future tax consequences of events that
      have been included in the financial statements or tax returns. Under this
      method, deferred tax liabilities and assets are determined based on the
      difference between financial statements and tax bases of assets and liabilities
      using enacted tax rates in effect for the year in which the differences are
      expected to reverse. Permanent differences between taxable income reported
      for
      financial reporting purposes and income tax purposes are
      insignificant.





For
      income tax reporting purposes, the Company's aggregate unused net operating
      losses approximate $3,280,000, and expire through 2026, subject to limitations
      of Section 382 of the Internal Revenue Code, as amended. The deferred tax assets
      related to the net operating loss carryforwards are approximately $1,100,000
      and
      $673,500 for the years ended December 31, 2006 and 2005, respectively.





The
      Company has provided a valuation reserve against the full amount of the net
      operating loss benefit for 2006 and 2005 since, in the opinion of management
      based upon the earning history of the Company, it is unlikely the benefits
      will
      be realized.








NOTE
      M -
      COMMITMENTS AND CONTINGENCIES





LEASE
      COMMITMENTS





The
      Company leases office space for its corporate offices in Alexandria, Virginia
      on
      a month to month basis. Rental expense for the years ended December 31, 2006
      and
      2005 was $2,253 and $2,308, respectively, and was charged to operations in
      the
      period incurred.





CONSULTING
      AGREEMENTS





The
      Company has consulting agreements with outside contractors to provide web
      development, business development, and investment banking services. The
      agreements are generally for a term of 12 months from inception and renewable
      automatically from year to year unless either the Company or Consultant
      terminates such engagement with written notice. Compensation under each
      agreement varies in accordance with the terms of each engagement.





F-29




LITIGATION





As
      of
      December 31, 2006, the Company is not a party to ant legal proceedings, nor
      are
      there any judgments against the Company. However, the Company may be subject
      to
      legal proceedings and claims, which 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 should not have
      a
      material adverse effect on its financial position, results of operations or
      liquidity.








NOTE
      N -
      LINE OF CREDIT





On
      September 12, 2005, the Company entered into an investment agreement (Agreement)
      with Dutchess Private Equities Fund, LP (Dutchess) to provide the Company with
      an Equity Line of Credit. Pursuant to the Agreement, Dutchess has agreed to
      provide the Company with up to $5,000,000 of funding during the 36-month period
      following the date a registration statement of the Company’s common stock is
      declared effective by the Securities and Exchange Commission. During this 36
      month period, the Company may request a draw down under the Equity Line of
      Credit by which the Company would sell shares of its common stock to Dutchess,
      which is obligated to purchase the shares under the Agreement. The Company
      may,
      at its election, require Dutchess to purchase an amount equal to no more than
      either (a) 200% of the average daily volume of the Company’s common stock for
      the 10 trading days prior to the put notice date, multiplied by the average
      of
      the three daily closing bid prices immediately preceding the put notice date
      or
      (b) $100,000; provided that the Company may not request more than $1,000,000
      in
      any single put notice. On the trading day following the put notice date, a
      pricing period of five trading days will begin. The purchase price for the
      common stock identified in the put notice will be equal to 95% of the lowest
      closing best bid price of the Company’s common stock during the pricing period.
      The Company is under no obligation to draw down under the Equity Line of Credit.
      In November 2006, a registration statement  pertaining
      to the Company’s common stock was declared effective by the Securities and
      Exchange Commission.








NOTE
      O -
      GOING CONCERN MATTERS





The
      accompanying statements have been prepared on a going concern basis, which
      contemplates the realization of assets and the satisfaction of liabilities
      in
      the normal course of business. As shown in the financial statements from October
      14, 1999 (date of inception of Company), the Company has generated minimal
      revenues and has accumulated losses of $3,799,571. These factors, among others,
      may indicate that the Company will be unable to continue as a going concern
      for
      a reasonable period of time.





The
      Company's existence is dependent upon management's ability to develop profitable
      operations and resolve its liquidity problems. Management anticipates the
      Company will attain profitable status and improve its liquidity through the
      continued development of its products, establishing a profitable market for
      the
      Company's products and additional equity investment in the Company. The
      accompanying financial statements do not include any adjustments that might
      result should the Company be unable to continue as a going concern.





In
      order
      to improve the Company's liquidity, the Company is actively pursing additional
      debt and equity financing through discussions with investment bankers and
      private investors. There can be no assurance the Company will be successful
      in
      its effort to secure additional equity financing.





If
      operations and cash flows continue to improve through these efforts, management
      believes that the Company can continue to operate. However, no assurance can
      be
      given that management's actions will result in profitable operations or in
      the
      resolution of its liquidity problems.




F-30