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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 Commission File Number 000-49971 Ocean West Holding Corporation  Delaware
    
    71-0876952(State of Incorporation)
    
    (IRS EmployerIdentification Number)
   15991 Red Hill Avenue, Suite 110
Tustin, California 92780
(Address of Principal Executive Offices) (714) 247-4200
(Issuers Telephone Number, Including Area Code) State the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date. 5,586,104 shares of Common Stock, 210,096 shares of Class B Common Stock
outstanding as of May 15, 2004 Transitional Small Business
Disclosure
Format:                        Yes
[  ]     No [X]




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TABLE OF CONTENTS PART 1 - FINANCIAL INFORMATION PageItem 1. Consolidated Financial StatementsConsolidated Balance Sheet  As of March 31, 2004 (unaudited)
    
    
    3Consolidated Statements of Operations  For the Three Months and Six Months Ended March 31, 2004 and 2003 (unaudited)
    
    
    4Consolidated Statements of Cash Flows  For the Six Months Ended March 31, 2004 and 2003 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis and Plan of Operation.
    
    
    7Item 3. Controls and Procedures.
    
    
    11PART II
- OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    12Item 4. Submission of Matters to a Vote of Security Holders.
    
    
    12Item 6. Exhibits and Reports on Form 8-K.
    
    
    12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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OCEAN WEST HOLDING CORPORATION AND SUBSIDIARY 
   March 31,2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    432,782Receivable from loans sold
    
    
    4,142,767Mortgage loans held for sale
    
    
    2,749,163Due from related party
    
    
    45,000Prepaid and other current assets
    
    
    285,502Total current assets
    
    
    7,655,214Property and equipment, net
    
    
    292,478Other assets:Originated mortgage servicing rights
    
    
    40,851Loans held for investment
    
    
    480,300Deposits
    
    
    62,630Total other assets
    
    
    583,781Total assets
    
    $
    8,531,473Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,304,952Due to stockholder
    
    
    25,247Current maturities of long-term debt
    
    
    813,576Current maturity of capital lease obligation
    
    
    61,362Current maturity of notes payable  stockholders
    
    
    7,500Warehouse lines of credit
    
    
    6,979,223Total current liabilities
    
    
    9,191,860Long-term liabilities:Long-term debt, less current maturities
    
    
    235,553Capital lease obligations, less current maturities
    
    
    31,572Amount due to related party
    
    
    15,000Notes
payable - stockholders, less current maturities
    
    
    295,000Total long- term liabilities
    
    
    577,125Total liabilities
    
    
    9,768,985Stockholders equity:Preferred stock, $.01 par value, 10,000,000 shares authorized:Series C, 1,000 shares issued and outstanding
    
    
    100,000Series E, 680 shares issued and outstanding
    
    
    170,000Series F, 1,050 issued and outstanding
    
    
    105,000Series G, 2,000 shares issued and outstanding
    
    
    200,000Series I, 125 shares issued and outstanding
    
    
    12,500Series L, 1,000 shares issued and outstanding
    
    
    1,000,000Series M, 5,000 shares authorized, 0 shares
issued and outstanding
    
    
    Class B common stock, $.01 par value, 5,000,000 shares
authorized, 210,096 shares issued and outstanding
    
    
    2,101Class D common stock, $.01 par value, 600,000 shares
authorized, none issued and outstanding
    
    
    Common
stock, $.01 par value, 30,000,000 shares
authorized, 5,586,104 issued and outstanding
    
    
    55,861Additional paid-in capital
    
    
    1,543,194Accumulated deficit
    
    
    (4,426,168
    )Total stockholders equity
    
    
    (1,237,512
    )Total liabilities and stockholders equity
    
    $
    8,531,473
 The accompanying notes are an integral part of these financial statements. 3




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OCEAN WEST HOLDING CORPORATION AND SUBSIDIARY 
   Three Months
    
    Three Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedMarch 31,
    
    March 31,
    
    March 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Revenues:Revenues from origination and sale
of mortgage loans, net
    
    $
    1,630,808
    
    
    $
    3,055,379
    
    
    $
    4,749,821
    
    
    $
    6,354,029Operating expenses:Salaries and wages
    
    
    561,703
    
    
    
    1,306,253
    
    
    
    1,970,005
    
    
    
    2,638,689Payroll taxes
    
    
    127,692
    
    
    
    262,805
    
    
    
    323,381
    
    
    
    441,370Other general and administrative expenses
    
    
    1,252,415
    
    
    
    1,447,580
    
    
    
    3,248,922
    
    
    
    2,844,515Depreciation & amortization
    
    
    48,756
    
    
    
    15,646
    
    
    
    96,838
    
    
    
    62,273Total operating expenses
    
    
    1,990,566
    
    
    
    3,032,284
    
    
    
    5,639,146
    
    
    
    5,986,847(Loss) income from operations
    
    
    (359,758
    )
    
    
    23,095
    
    
    
    (889,325
    )
    
    
    367,182Provision for income taxes
    
    
    4,500
    
    
    
    
    
    
    
    4,500
    
    
    
    Net (loss) income
    
    
    (364,258
    )
    
    
    23,095
    
    
    
    (893,825
    )
    
    
    367,182Dividends on preferred shares
    
    
    35,002
    
    
    
    50,010
    
    
    
    80,371
    
    
    
    110,454Net (loss) income applicable to common
shareholders
    
    $
    (399,260
    )
    
    $
    (26,915
    )
    
    $
    (974,196
    )
    
    $
    256,728Net (loss) income applicable to common
shareholders per common share
basic and diluted
    
    $
    (0.07
    )
    
    $
    0.00
    
    
    $
    (0.17
    )
    
    $
    0.04Weighted average number of common shares
outstanding basic and diluted
    
    
    5,796,200
    
    
    
    5,795,200
    
    
    
    5,796,200
    
    
    
    5,795,200
 The accompanying notes are an integral part of these financial statements. 4




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OCEAN WEST HOLDING CORPORATION AND SUBSIDIARY 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months Ended
    
    Six Months EndedMarch 31, 2004
    
    March 31, 2003Cash flows from operating activities:Net (loss) income
    
    $
    (893,825
    )
    
    $
    367,182Adjustments to reconcile net income
to net cash provided by operating activities:Depreciation and amortization
    
    
    96,838
    
    
    
    62,273Changes in operating assets and liabilities:(Increase) decrease in assets:Restricted cash
    
    
    3,010
    
    
    
    (209,622
    )Receivable from loans sold
    
    
    2,568,728
    
    
    
    6,254,326Mortgage loans held for sale
    
    
    (1,321,346
    )
    
    
    (2,761,662
    )Prepaid and other current assets
    
    
    698,820
    
    
    
    (15,003
    )Increase (decrease) in liabilities:Accounts payable and accrued expenses
    
    
    (182,381
    )
    
    
    (194,841
    )Client trust payable
    
    
    (3,010
    )
    
    
    209,622Net cash provided by operating activities
    
    
    966,834
    
    
    
    3,712,275Cash flows from investing activities:Purchases of property and equipment
    
    
    (10,733
    )
    
    
    (33,468
    )Net change in notes receivable
    
    
    
    
    
    
    (8,000
    )Net cash used for investing activities
    
    
    (10,733
    )
    
    
    (41,468
    )Cash flows from financing activities:Net payments under warehouse lines of credit
    
    
    (1,053,753
    )
    
    
    (3,544,788
    )Principal borrowings (repayments) on debt
    
    
    134,753
    
    
    
    (43,429
    )Payments on capital lease obligations
    
    
    (41,017
    )
    
    
    (53,051
    )Borrowings (payments) on notes payable, stockholders
    
    
    59,100
    
    
    
    (164,255
    )Repurchase of series M preferred
    
    
    
    
    
    
    (250,000
    )Proceeds from sale of preferred stock
    
    
    
    
    
    
    500,000Preferred stock dividends
    
    
    (80,371
    )
    
    
    (110,454
    )Net cash used for financing activities
    
    
    (981,288
    )
    
    
    (3,665,977
    )Net increase (decrease) in cash and cash equivalents
    
    
    (25,187
    )
    
    
    4,830Cash and cash equivalents,beginning of period
    
    
    457,969
    
    
    
    187,862Cash and cash equivalents,end of period
    
    $
    432,782
    
    
    
    192,692Supplemental disclosure of cash flow information -Interest paid
    
    $
    72,271
    
    
    $
    405,273Income taxes paid
    
    $
    4,500
    
    
    $
    
 The accompanying notes are an integral part of these financial statements. 5




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (1) Basis of Presentation: The accompanying unaudited interim consolidated financial statements of Ocean
West Holding Corporation, and its subsidiary Ocean West Enterprises, Inc. dba
Ocean West Funding (collectively the Company), reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of the
results of the interim periods presented. All such adjustments are of a normal
recurring nature. Since inception through March 31, 2004, the Company has suffered recurring
losses from operations; we have incurred aggregate net losses of
approximately $4,426,000.
In addition, the Company was not in compliance with certain loan covenants
under one of its warehouse lines of credit as of March 31, 2004. These
circumstances raise substantial doubt about our ability to continue as a going
concern, as described in the explanatory paragraph on our independent auditors
report on the September 30, 2003 consolidated financial statements, included in
the Companys Annual Report on Form 10-KSB. Management believes that cash flows from operations will be sufficient to meet
the Companys current liquidity and capital needs at least for the next fiscal
quarter ended June 30, 2004. The Company entered into an agreement on January
12, 2004, with Freedom Mortgage Corporation (Freedom) and First Fidelity Capital Markets
to transfer all operations in exchange for a share of the profits from those
operations. On February 20, 2004, the Company, Freedom Mortgage Corporation
and First Fidelity Capital Markets mutually terminated their agreement. The
agreement was originally filed as an exhibit to Form 8K on January 20, 2004.
The Company continues to seek investment alternatives to meet its liquidity and
capital needs; however, no reliance can be made on the Company achieving such
for the fiscal quarter ended June 30, 2004. (2) Nature of Business: Ocean West Holding Corporation (Ocean West) was organized in the State of
Delaware on August 15, 2000 as a holding company with negligible assets and
liabilities. During March 2002, Ocean West acquired all of the issued and
outstanding shares of preferred and common stock of Ocean West Enterprises,
Inc. dba Ocean West Funding (Ocean West Enterprises) in an exchange of
shares. Since the shareholders of Ocean West Enterprises are the controlling
shareholders of Ocean West after the exchange, Ocean West Enterprises treated
the transaction as a recapitalization, and the historical financial statements
reflect the operations of Ocean West Enterprises. Ocean West Enterprises, a California corporation, was incorporated in November
1988 for the purpose of engaging in mortgage banking activities. It is
involved in the process of originating, packaging and funding of HUD and other
government-insured loans and non-government-insured loans in the United States. (3) Principles of Consolidation: The consolidated financial statements include the accounts of Ocean West and
its wholly owned subsidiary, Ocean West Enterprises. All significant
inter-company accounts and transactions have been eliminated. (4) Interim Period: These financial statements have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted.
Operating results for the three and six months ended March 31, 2004 are not
necessarily indicative of the results that may be expected for the full year
ending September 30, 2004. The unaudited interim consolidated financial statements should be read in
conjunction with the Companys audited financial statements and notes thereto
for the past fiscal year ended September 30, 2003, included in the Companys
Annual Report on Form 10-KSB. Earnings per share have been calculated based upon the weighted average number
of common shares outstanding during both reporting periods. 6




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Item 2.
Managements Discussion and Analysis and Plan of Operation. General Ocean West is a holding company, which holds all of the issued and
outstanding stock of Ocean West Enterprises. Ocean West Enterprises is a
wholesale and retail mortgage banking company primarily engaged in the business
of originating and selling loans secured by real property with one to four
units. We offer a wide range of products and historically, we primarily
targeted high quality, low risk borrowers. However, we recently expanded into
the higher risk sub-prime market to assist in efforts to diversify our lending
practices. Our income is generated from loan origination fees and from gains
from sales of mortgage loans on the secondary mortgage market and to private
investors. We also generate revenues through fees, such as brokerage fees,
underwriting fees, processing fees and document drawing fees, in connection
with the funding or brokering of a loan. During fiscal 2004, we funded
approximately 16.5% of our loans through our warehouse credit facilities as
compared to 20% in 2003. Typically, the amount drawn from our warehouse lines
of credit for a particular loan is repaid when the loan is sold in the
secondary mortgage market or to an investor. We face strong competition in originating, purchasing and selling mortgage
loans and related mortgage servicing rights. Our competition is principally
from savings and loans associations, other mortgage companies, commercial banks
and, to a lesser degree, credit unions and insurance companies, depending upon
the type of mortgage loan product offered. In addition to offering a wide
range of competitive products, we believe we compete with these entities
through our efforts to provide helpful and timely service to mortgage brokers
and borrowers alike. Many of these institutions have greater financial
resources than we do and maintain a significant number of branch offices in the
areas in which we conduct operations. Increased competition for mortgage loans
from other lenders may result in a decrease in the volume of mortgage loans
that we are able to originate and purchase. If we are unable to compete
effectively, our operations and financial condition could be materially and
adversely affected. During the quarter ended March 31, 2004, in anticipation of completing the
agreement with Freedom, the Company transferred its loan origination operations
to Freedom. All revenues and expenses associated with the transferred
operations were considered to be Freedoms. Upon termination of the agreement
the loan operations were transferred back. Ocean West changed its fiscal year-end subsequent to March 31, 2002 from
March 31 to September 30 effective in 2002. The reasons for the change were a
reduction in auditing costs as fewer companies use a September 30 year-end and
to aid in HUD reporting. Critical Accounting Policies As set forth in greater detail in Footnote (1) to Ocean Wests September
30, 2003 financial statements Summary of Significant Accounting Policies the
Company recognizes revenue upon sale of a loan when the documents are shipped
to the independent investors, and all rights have passed and the Company has
become obligated to convey the loan, thereby isolating the transferred assets
from the Company and fulfilling all criteria of SFAS No. 140. If these
criteria were not met, then revenue recognition would be delayed until the
proceeds were subsequently received from the investors, typically within the
following month. Pursuant to SFAS No. 91, the Company capitalizes its loan origination
costs, including an amount of its payroll nd related costs which are directly
attributable to the credit origination process. The measurement of such
capitalizable costs requires the use of some judgments by management, as to the
portion of such costs associated with credit origination and with other
activities. Disclosure, pursuant to SFAS No. 107, is required of the fair value of
financial instruments. However, since most of the Companys financial
instruments turn over within a very short time period, management discloses
that the net book value approximates fair value at the balance sheet date. 7




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Item 2. Management
Discussion and Analysis and Plan of Operation (continued) Results of Operations We believe that interest rate trends potentially have the single largest
effect on our results of operations. Trends in interest rates are not only
important to our refinance business, but are also very important in the
purchase market. As interest rates rise, more individuals are eliminated as
potential borrowers. The reason for this is simple  as interest rates get
higher, so do the mortgage payments. Higher payments mean fewer people have
the ability to qualify for loans. Historically, mortgage bankers like us are
more negatively affected by a rising interest rate market than banks. Banks
tend to have an advantage in an adjustable rate market, because banks have the
ability to hold loans and, therefore, can be more creative in designing
adjustable rate loans to fit the borrowers needs. Mortgage bankers like us
are limited to loan products that can be sold in the secondary market or
securitized. These programs have become more competitive in recent years, but
we believe banks still retain a competitive advantage. Historically inflation has an impact on us because inflation typically
impacts interest rates. As the threat of inflation becomes more of a concern,
interest rates tend to rise. This result is based upon the perception that the
Federal Reserve will revise short-term interest rates to keep inflation in
check. This concern ultimately affects mortgage rates. Our revenues are currently derived approximately two-thirds from sale of
loans and one-third from fees generated in connection with such sales.
Revenues generated from the sale of a loan vary based on loan type and size.
Premiums paid can range from 1/8% to 5% of the loan amount. Conventional
conforming loans have lowest profit margins while alternative A and sub-prime
loans have higher premiums. Sub-prime loans typically have the largest margins.
Fees received also vary depending on loan type and origination source and
generally range from $495 to $995 per loan. Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 During the quarter ended March 31, 2004, Ocean West Enterprises funded 770
loans with an aggregate dollar value of approximately $134 million compared to
1,169 loans with an aggregate dollar value of approximately $215 million in the
quarter ended March 31, 2003. The average loan size for the quarter ended
March 31, 2004 was approximately $175,000, which was a decrease from an average
loan size of $185,000 for the quarter ended March 31, 2003. Net revenues from origination and/or sale of loans decreased to $1.6
million for the quarter ended March 31, 2004 from $3.1 million for the quarter
ended March 31, 2003. The decrease in revenues can be attributed to the loan
production transferred to Freedom, who then paid expenses for those loans. Total operating expenses decreased by $1.0 million to $2.0 million for the
quarter ended March 31, 2004 from $3.0 million for the quarter ended March 31,
2003. Salary, wages and payroll taxes were $689,000 for the quarter ended
March 31, 2004 compared to $1.6 million for the March 31, 2003. The decrease
of $880,000 was primarily due to the transfer of loan production to Freedom.
Other general and administrative expenses were primarily made up of rent,
advertising services, fees for professional services, insurance and office
expenses. These expenses decreased $195,000 to $1.3 million for the quarter
ended March 31, 2004 from $1.4 million for the same period in 2003. Ocean West had a net loss of $364,000 for the quarter ended March 31, 2004
compared to a net income of $23,000 for the same quarter of 2003. The
significant decrease in income for the March 31, 2004 quarter was due to a
decrease in loan volume partially offset by a decrease in general and
administrative expenses. Six Months Ended March 31, 2004 Compared to the Six Months Ended March 31, 2003 During the six months ended March 31, 2004, Ocean West Enterprises made
1,912 loans with an aggregate dollar value of approximately $340 million
compared to 2,391 loans with an aggregate dollar value of approximately $421
million in the six months ended March 31, 2003. The average loan size for the
six month period ended March
31, 2004 and the six month period ended March 31, 2003 was approximately
$177,000. Most of the loans originated were in principal amounts between
$100,000 and $180,000. 8




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Item 2. Management
Discussion and Analysis and Plan of Operation (continued) Net revenues from origination and/or sale of loans decreased to $4.8
million for the six months ended March 31, 2004 from $6.4 million for the six
months ended March 31, 2003. The decrease in revenues can be attributed to the
transfer of loan production to Freedom, which then paid expenses for those
loans, as well as current market conditions. Total operating expenses decreased by $348,000 to $5.6 million for the six
months ended March 31, 2004 from $6.0 million for the six months ended March
31, 2003. Salary, wages and payroll taxes were $2.3 million for the six months
ended March 31, 2004 compared to $3.1 million for the six months ended March
31, 2003. The decrease of $787,000 was primarily due to the transfer of loan
production to Freedom. Other general and administrative expenses were
primarily made up of rent, advertising services, and fees for professional
services, insurance and office expenses. These expenses increased $404,000 to
$3.3 million for the six months ended March 31, 2004 from $2.8 million for the
same period in 2003. Rent, insurance and related office expenses increased as
more branch officers were added as we continued to move from primarily
originating loans through independent brokers to originating loans primarily
though our employees, which was partially offset by the transfer of loan
production to Freedom. Ocean
West had a net loss of $894,000 for the six month period ended March
31, 2004 compared to net income of $367,000 for the same period of 2003. The
significant decrease in income for the six month period ended on March 31, 2003
was due to a decrease in loan volume and an increase in general and
administrative expenses. Liquidity and Capital Resources Liquidity is the ability of a company to generate funds to support asset
growth, satisfy disbursement needs, maintain reserve requirements and otherwise
operate on an ongoing basis. If our loan volume were to increase too rapidly,
we believe the increase could have a severe impact on our liquidity. Our
warehouse credit facilities limit the amount that may be advanced on each loan
funded. Therefore, cash must be used to fund the additional dollars needed to
close escrow. Thus, it is crucial that we closely monitor our loan volume. Historically we have funded loans primarily through our warehouse credit
facilities or using cash on hand. During fiscal 2004, we have funded
approximately 16.5% of our loans through our warehouse credit facilities.
Loans that are closed using our credit facilities are funded through short term
borrowing on our warehouse lines of credit. We pay interest on funds advanced
under the warehouse lines of credit at a pre-negotiated rate. The interest
rate at which we borrow is variable in nature and typically averages between
4.5% and 5.5% per annum. The average time between funding a mortgage and the
receipt of the proceeds from the sale of the mortgage was approximately fifteen
days during fiscal 2003 and continued as such during the six months ended March
31, 2004. Our ability to finance and purchase mortgage loans depends on our ability
to secure warehouse lines of credit with acceptable terms. Previously, we
have funded the majority of our loans through First Collateral Services. First
Collateral ceased providing us funds under the line effective April 30, 2003.
The outstanding balance on the First Collateral Services line of credit is
being paid off as the loans securing the lines are sold. As of March 31, 2004,
the outstanding balance with First Collateral Services was $521,758. Until
January 2003, we had frequently drawn amounts in excess of the limit on the
line. This line bears interest at 8% and the rate on September 30, 2002 was
4.311%. Currently, we fund loans through our warehouse lines of credit with
Provident Consumer Financial Services and Warehouse One Acceptance Company IV,
LLC. As of March 31, 2004 the outstanding balance with Provident Consumer
Financial Services and Warehouse One were $5,353,887 and $1,103,578,
respectively. The lending limit on the line of credit through Provident
Consumer Financial Services is currently $8,000,000 and the Warehouse One
lending limit is $5,000,000. The Warehouse One and Provident lines are also $50
to $100 more per transaction than those charged by First Collateral. In
addition, the lending limits on the First Collateral line of credit had been
larger than those granted by the current providers. The loan agreement
governing the terms of the Warehouse One line of
credit contains a restrictive covenant relating to tangible net worth.
The Company received an amendment to its agreement with Warehouse One changing
its financial net worth covenant from $750,000 to $450,000 on December 30,
2003. Currently, the Company is not in compliance with its lender under the
new amended agreement. By not complying with the restrictive covenants, there
is the possibility that we may lose the credit facility at any time, which
would cause a negative impact on the way we do business and a material adverse
effect on our results of operations and financial condition. 9




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Item 2. Management
Discussion and Analysis and Plan of Operation (continued) At March 31, 2004, the interest rate charged on our warehousing lines of
credit with Provident Consumer Financial Services and Warehouse One were
approximately 6.09% and 4.35%, respectively. The fees associated with Provident
Consumer Financial Services and Warehouse One is also $50 to $100 more per
transaction than those charged by First Collateral. In addition the lending
limits on the First Collateral line of credit has been larger than those
granted by the current providers. The loss of First Collateral as our primary
warehouse lender has increased our cost of funds and has limited our ability to
fund a higher volume of loans and may have a material adverse effect on our
results of operations and financial condition. To the extent we are not
successful in securing alternate warehousing sources we may have to curtail
our mortgage loan origination activities, which would also have a material
adverse effect on our results of operations and financial condition. At the present time, our liquidity resources are minimal. We are
currently not in compliance and have not consistently met the HUD net worth
requirements. We were unable to maintain a minimum net worth of $1,000,000
to retain our mortgagee status. Due to the facts that the Company was unable
to maintain its required net worth and the amount of FHA business has decreased
significantly over the past few years, we elected to change our status to
Correspondent with HUD in July of 2003. The percentage of FHA loans funded for
the quarter ended March 31, 2004 was 1.7% based on dollar volume, compared to
9.2% for the three month period ended March 31, 2003. Historically we have funded operations through a combination of borrowings
and issuance of stock. We currently intend to retain our earnings for the
foreseeable future to help increase our liquidity. In the short term, our goal
is to maintain current production levels with no significant increases or
decreases until our liquidity increases. Management continues to explore
investment alternatives to aid in its liquidity, but there can be no reliance
made on such. Cash Flows During the first six months of fiscal 2004 and 2003 we had net cash
provided by operating activities of $967,000 and $3.7 million, respectively.
The primary sources of net cash provided were a decrease in the amount of
mortgage loans held for sale and receivables from loans sold over the three
month period ending March 31, 2003, as well as a decrease in prepaid and other
current assets for the period. The primary source of the net cash used for
operating activities for the three month period ended March 31, 2003 was an
increase in the amount of mortgage loans held for sale and receivables from
loans sold. As investors purchase loans, the amounts advanced for such loans
through the warehouse lines of credit are paid. At that time, the receivables
are cleared and the cash deposited in our operating account. These accounts
vary significantly depending upon where the bulk of the loans are in the
process of funding and selling. Net cash used for investing activities during the first six months of
fiscal 2004 and 2003 was $10,000 and $41,000 , respectively, which was
attributable to purchase property and equipment and the issuance of notes
receivable. Net cash used for financing activities for the six months ended March 31,
2004 was $981,000. This consisted primarily of payments under the warehouse
lines of credit of $1.1 million, payments of $41,000 on capital lease
obligations, as well as dividends paid of $80,000 offset by borrowings of
$135,000 on debt and 59,000 on notes payable from stockholder. Net cash used
for financing activities for the six months ended March 31, 2003 was $3.7
million. This consisted primarily of borrowings under the warehouse lines of
credit of $3.5 million and proceeds from sale of preferred stock of $500,000
offset by payments of $164,000 on notes payable to stockholders, $43,000 on
long-term debt and $53,000 on capital lease obligations, repurchase of Series M
Preferred Stock of $250,000 as well as dividends paid of $110,000. At September 30, 2003, the Company has net operating loss carryforwards
(NOLs) of approximately $1,853,000, for Federal income tax reporting
purposes and approximately $1,028,000 for state reporting purposes, expiring in
various years through 2020. On September 11, 2002, the Governor of California signed into law new tax
legislation that suspends the
use of NOL carry forwards into tax years beginning on or after January 1,
2002 and 2003. Should the Company have taxable income for the year ending
December 31, 2003, it may not look to California net operating losses generated
in prior 10




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Item 2. Management
Discussion and Analysis and Plan of Operation (continued) years to offset taxable income. This suspension will not apply to tax
years beginning in 2004 and beyond. Regulatory Trends The regulatory environments in which we operate have an impact on the
activities in which we may engage, how the activities may be carried out and
the profitability of those activities. Therefore, changes to laws, regulations
or regulatory policies can affect whether and to what extent we are able to
operate profitably. For example, proposed state and federal legislation
targeted at predatory lending could have the unintended consequence of raising
the cost or otherwise reducing the availability of mortgage credit for those
potential borrowers with less than prime-quality credit histories, thereby
resulting in a reduction of otherwise legitimate sub-prime lending
opportunities. Forward-Looking Statements Statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. In addition, words such as
believes, anticipates, expects and similar expressions are intended to
identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements or events, or timing of events, to
differ materially from any future results, performance or achievements or
events, or timing of events, expressed or implied by such forward-looking
statements. We cannot assure that we will be able to anticipate or respond
timely to the changes that could adversely affect our operating results in one
or more fiscal quarters. Results of operations in any past period should not
be considered indicative of results to be expected in future periods.
Fluctuations in operating results may result in fluctuations in the price of
our securities. In the event we need to raise additional financing, there can be no
assurance that any such financing will be available on acceptable terms. If
such financing is not available on satisfactory terms, we may be unable to
expand or continue our business as desired and operating results may be
adversely affected. Debt financing will increase expenses and must be repaid
regardless of operating results. Equity financing could result in dilution to
existing stockholders. Some of the more prominent known risks and uncertainties of our business
are set forth below. However, this section does not discuss all possible risks
and uncertainties to which we are is subject, nor can it be assumed that there
are not other risks and uncertainties which may be more significant.  
    
    Our losses from period to period;
    
    Our failure to continuously meet HUD minimum net worth requirements;
    
    Our failure to continue to be an approved FHA mortgagee;
    
    Our dependence on the warehouse lines of credit which has
been reduced and our failure to comply with restrictive covenants
relating to the lines of credit;
    
    Our need for additional funding sources so that our ability
to originate and fund loans is not impaired and
    
    Our ability to compete with banks and other mortgage lenders that are significantly larger. 
 Item 3. Controls and Procedures. Our President and Chief Executive Officer and our Chief Financial Officer
(the Certifying Officers) are responsible for establishing and maintaining
disclosure controls and procedures for the Company. The Certifying Officers
have designed such disclosure controls and procedures to ensure that material
information is made known to them, particularly during the period in which this
report was prepared. The Certifying Officers have evaluated the
effectiveness of the Companys disclosure controls and procedures as of
the end of the period covered by this report and believe that the Companys
disclosure controls and procedures are effective based on the required
evaluation. During the 11




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period covered by this report, there were no changes in
internal controls that materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting. PART II - OTHER INFORMATION 
 Item 1. Legal Proceedings We are party to claims from time to time, not required to be disclosed in
accordance with Item 103 of Regulation S-B. While management currently
believes that the ultimate outcome of these proceedings, individually and in
the aggregate, will not have a material adverse effect on our financial
position or results of operations, litigation is subject to inherent
uncertainties. Were an unfavorable ruling to occur, there exists the
possibility of a material adverse impact on our results of operations of the
period in which the ruling occurs. The estimate of the potential impact on our
financial position or overall results of operations for the above legal
proceedings could change in the future. 
 Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. 
 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits See Index of Exhibits on page 14. (b) Reports on Form 8-K On March 5, 2004, the Company filed a report on Form 8-K disclosing that
the Company, Freedom Mortgage Corporation and First Fidelity Capital Markets
mutually terminated their agreement. 12




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SIGNATURES In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. OCEAN WEST HOLDING CORPORATIONDate: May 24, 2004By:
    
    /s/ Marshall L. StewartMarshall L. StewartPresident and Chief Executive OfficerDate: May 24, 2004By:
    
    /s/ Daryl S. MeddingsDaryl S. MeddingsExecutive Vice President and Chief Financial Officer(Principal Accounting Officer)
 13




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OCEAN WEST HOLDING CORPORATION
Quarterly Report on Form 10-QSB
For the Quarter Ended March 31, 2004 INDEX OF EXHIBITS ExhibitDescription of Exhibit
    
    Table Number*
    
    NumberArticles of Incorporation and Bylaws
    
    
    3(i)
    
    Certificate of Incorporation of Ocean
West Holding Corporation
    
    
    
    
    
    
    3.1
    (1)(ii)
    
    Bylaws of Ocean West Holding
Corporation
    
    
    
    
    
    
    3.2
    (1)Instruments Defining the Rights of Security Holders
    
    
    4(i)
    
    Common Stock Purchase Warrant Agreement
Between Ocean West Holding Corporation and
Registrar and Transfer Company
    
    
    
    
    
    
    4.1
    (2)302 Certifications
    
    
    31(i)
    
    Certificate of Chief Executive Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    31.1(ii)
    
    Certificate of Chief Financial Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    31.2906 Certifications
    
    
    32(i)
    
    Certificate of Chief Executive Officer
and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
    
    
    
    
    
    
    32.1
   *
    
    Pursuant to Item 601 of Regulation S-B.  (1)
    
    Previously filed as an exhibit to the Registration Statement on Form S-1
of Ocean West Holding Corporation (SEC File No. 333-95927) filed on
February 1, 2000.  (2)
    
    Previously filed as an exhibit to the Registration Statement on Form S-1
of Ocean West Holding Corporation (File No. 333-86484) filed on April 18,
2002. 14