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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 June 30, 2004 Commission File Number 000-49971 Ocean West Holding Corporation  71-0876952Delaware
    
    (IRS Employer(State of Incorporation)
    
    Identification 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 August 23, 2004 Transitional Small Business Disclosure Format:     Yes o No x




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TABLE OF CONTENTS PAGE #PART 1  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheet  As of June 30, 2004 (unaudited)
    
    
    3Consolidated Statements of Operations  For the Three Months and Nine Months Ended
June 30, 2004 and 2003 (unaudited)
    
    
    4Consolidated Statements of Cash Flows  For the Nine Months Ended
June 30, 2004 and 2003 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Management Discussions and Analysis and Plan of Operations
    
    
    7Item 3. Controls and Procedures
    
    
    12PART 2  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    12Item 2.
Changes in Securities
    
    
    12Item 3.
Defaults Upon Senior Securities
    
    
    13Item 4. Submission of Matters to a vote of Security Holders
    
    
    13Item 5.
Other Information
    
    
    13Item 6.
Exhibits and Reports on Form 8-K
    
    
    13Exhibit 4.3Exhibit 31.1Exhibit 31.2Exhibit 32.1
 2




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CONSOLIDATED BALANCE SHEET OCEAN WEST HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(unaudited) June 30,2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    159,505Receivable from loans sold
    
    
    2,636,360Mortgage loans held for sale
    
    
    315,324Due from related party
    
    
    45,000Prepaid and other current assets
    
    
    387,192Total current assets
    
    
    3,543,381Property and equipment, net
    
    
    245,406Other assets:Originated mortgage servicing rights
    
    
    39,195Loans held for investment
    
    
    327,700Deposits
    
    
    62,630Total other assets
    
    
    429,525Total assets
    
    $
    4,218,312Liabilities
and Stockholders DeficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,019,715Due to stockholder
    
    
    25,247Current maturities of long-term debt
    
    
    944,004Current maturity of capital lease obligation
    
    
    59,619Current maturity of notes payable  stockholders
    
    
    135,000Warehouse lines of credit
    
    
    3,266,098Total current liabilities
    
    
    5,449,683Long-term liabilities:Long-term debt, less current maturities
    
    
    234,438Capital lease obligations, less current maturities
    
    
    24,520Amount due to related party
    
    
    15,000Notes payable  stockholders, less current maturities
    
    
    284,232Total long-term liabilities
    
    
    558,190Total liabilities
    
    
    6,007,873Stockholders
deficit: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
    
    
    (4,978,217
    )Total
stockholders deficit
    
    
    (1,789,561
    )Total
liabilities and stockholders deficit
    
    $
    4,218,312
 The accompanying notes are an integral part of these financial statements. 3




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CONSOLIDATED STATEMENTS OF OPERATIONS OCEAN WEST HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Three Months
    
    Three Months
    
    Nine Months
    
    Nine MonthsEnded
    
    Ended
    
    Ended
    
    EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Revenues:Revenues from origination and sale
of mortgage loans, net
    
    $
    1,464,818
    
    
    $
    3,337,055
    
    
    $
    6,214,639
    
    
    $
    9,691,084Operating expenses:Salaries and wages
    
    
    583,773
    
    
    
    1,337,229
    
    
    
    2,553,778
    
    
    
    3,975,918Payroll taxes
    
    
    159,624
    
    
    
    221,788
    
    
    
    483,005
    
    
    
    663,158Other general and administrative expenses
    
    
    1,188,393
    
    
    
    1,501,278
    
    
    
    4,437,315
    
    
    
    4,345,793Depreciation & amortization
    
    
    48,756
    
    
    
    37,608
    
    
    
    145,594
    
    
    
    99,881Total operating expenses
    
    
    1,980,546
    
    
    
    3,097,903
    
    
    
    7,619,692
    
    
    
    9,084,750(Loss) income from operations
    
    
    (515,728
    )
    
    
    239,152
    
    
    
    (1,405,053
    )
    
    
    606,334Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    4,500
    
    
    
    Net (loss) income
    
    
    (515,728
    )
    
    
    239,152
    
    
    
    (1,409,553
    )
    
    
    606,334Dividends on preferred shares
    
    
    36,319
    
    
    
    49,082
    
    
    
    116,690
    
    
    
    159,536Net (loss) income applicable to common
shareholders
    
    $
    (552,047
    )
    
    $
    190,070
    
    
    $
    (1,526,243
    )
    
    $
    446,798Net (loss) income applicable to common
shareholders per common share
basic and diluted
    
    $
    (0.10
    )
    
    $
    0.03
    
    
    $
    (0.26
    )
    
    $
    0.08Weighted average number of common shares
outstanding basic and diluted
    
    
    5,796,200
    
    
    
    5,795,409
    
    
    
    5,796,200
    
    
    
    5,795,270
 The accompanying notes are an integral part of these financial statements. 4




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CONSOLIDATED STATEMENTS OF CASH FLOWS OCEAN WEST HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Nine Months Ended
    
    Nine Months EndedJune 30, 2004
    
    June 30, 2003Cash flows from operating activities:Net (loss) income
    
    $
    (1,409,553
    )
    
    $
    606,334Adjustments to reconcile net income
(loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    145,594
    
    
    
    99,881Loss on the sale of property
    
    
    
    
    
    
    39,040Reserve on
loans held for investment
    
    
    152,600
    
    
    
    Changes in operating assets and liabilities:(Increase) decrease in assets:Restricted cash
    
    
    3,010
    
    
    
    38,516Receivable from loans sold
    
    
    4,075,135
    
    
    
    12,685,430Mortgage loans held for sale
    
    
    1,112,494
    
    
    
    83,925Prepaid and other current assets
    
    
    723,682
    
    
    
    (475,519
    )Increase (decrease) in liabilities:Accounts payable and accrued expenses
    
    
    (467,618
    )
    
    
    (364,817
    )Client trust payable
    
    
    (3,010
    )
    
    
    (38,516
    )Net cash provided by operating activities
    
    
    4,332,334
    
    
    
    12,674,274Cash flows from investing activities:Purchases of property and equipment
    
    
    (10,733
    )
    
    
    (33,974
    )Net change in notes receivable
    
    
    
    
    
    
    (8,000
    )Proceeds from the sale of property
    
    
    
    
    
    
    26,104Net cash used for investing activities
    
    
    (10,733
    )
    
    
    (15,870
    )Cash flows from financing activities:Net payments under warehouse lines of credit
    
    
    (4,766,878
    )
    
    
    (12,384,632
    )Proceeds from short term debt
    
    
    
    
    
    
    300,000Payments on
advances from stockholders
    
    
    (13,400
    )
    
    
    Principal borrowings (repayments) on debt
    
    
    137,484
    
    
    
    (90,282
    )Payments on capital lease obligations
    
    
    (49,813
    )
    
    
    (82,846
    )Borrowings (payments) on notes payable, stockholders
    
    
    189,232
    
    
    
    (126,755
    )Repurchase of series M preferred
    
    
    
    
    
    
    (400,000
    )Proceeds from sale of preferred stock
    
    
    
    
    
    
    500,000Preferred stock dividends
    
    
    (116,690
    )
    
    
    (159,536
    )Exercise of warrants
    
    
    
    
    
    
    1,250Net cash used for financing activities
    
    
    (4,620,065
    )
    
    
    (12,442,801
    )Net increase (decrease) in cash and cash equivalents
    
    
    (298,464
    )
    
    
    215,603Cash and cash equivalents,beginning of period
    
    
    457,969
    
    
    
    187,862Cash and cash equivalents,end of period
    
    $
    159,505
    
    
    $
    403,465Supplemental disclosure of cash flow informationInterest paid
    
    $
    115,443
    
    
    $
    448,194Income taxes paid
    
    $
    4,500
    
    
    $
    Supplemental non-cash investing and financing activitiesCapital lease obligations incurred for the purchase of office equipment
    
    $
    17,749
    
    
    $
    129,940
 The accompanying notes are an integral part of these financial statements. 5




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (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 June 30, 2004, the Company has suffered recurring
losses from operations; we have incurred aggregate net losses of approximately
$4,978,217. In addition, the Company was not in compliance with certain loan
covenants under one of its warehouse lines of credit as of June 30, 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 September 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. On July 1, 2004, the Company entered
into a Stock Subscription Agreement with Consumer Direct of America, a
Nevada corporation, whereby Consumer Direct of America would acquire 1.5 million shares of senior
preferred stock for cash. 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 September 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 nine months ended June 30, 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. (5) Subsequent Events: Change in
Control. On July 15, 2004, Marshall L. Stewart, Daryl
S. Meddings, Enfo Loan Corporation, Kingsley and Nancy Cannon and
Dale and Suzanne Delmege agreed to sell 4,921,930 of their shares of
common stock of the Company to Consumer Direct of America, a Nevada
corporation (CDA) in exchange for shares of CDA (the
Transfer). The Transfer constitutes a change in control
of the Company. Marshall L. Stewart and Daryl S. Meddings will remain
in their current positions as directors and officers of the Company
and will appoint Wayne Bailey to the Board of Directors of the
Company to fill the one vacancy on the Board until the next annual
shareholders meeting. See exhibit 4.2 to Form 8K filed on
August 2, 2004, change in control of registrant. Subscription
Agreement. On July 1, 2004, Consumer Direct of America, a
Nevada corporation, purchased 1.5 million shares of senior preferred
stock of Ocean West Holdings, Inc., for an aggregate purchase price of $1,500,000 in cash.
Since the offer and sale of the Shares have not been registered under
the Securities Act in reliance upon Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated
thereunder, the Purchaser will offer or resell the Shares only in
compliance with the provisions of all applicable Federal and state
securities laws and regulations. The Purchaser will offer or resell
such Shares only if such Shares are registered under the Securities
Act or an exemption from such registration is available. Unless the
Shares that are the subject of such offer or sale are registered
under the Securities Act or an exemption from registration is
available (in which latter case the Company shall have received an
opinion of counsel, in form and substance reasonably satisfactory to
the Company, to such effect), the Company shall not permit the
transfer of the Shares. 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 17.31% of our loans through our warehouse credit facilities as
compared to 26% 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 and 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s 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 June 30, 2004 Compared to Three Months Ended June 30, 2003 During
the quarter ended June 30, 2004, Ocean West Enterprises funded
682
loans with an aggregate dollar value of approximately $134 million compared to
1,521 loans with an aggregate dollar value of approximately $287 million in the
quarter ended June 30, 2003. The average loan size for the quarter ended June
30, 2004 was approximately $196,000, which was an increase from an average loan
size of $189,000 for the quarter ended June 30, 2003. The
decrease in revenues can be attributed to the overall market
conditions of the industry, as well as a decrease in working capital. Net revenues from origination and/or sale of loans decreased to $1.5
million for the quarter ended June 30, 2004 from $3.3 million for the quarter
ended June 30, 2003. The decrease in revenues can be attributed to the overall
market conditions of the industry. Total operating expenses decreased by $1.1 million to $2.0 million for the
quarter ended June 30, 2004 from $3.1 million for the quarter ended June 30,
2003. Salary, wages and payroll taxes were $743,000 for the quarter ended June
30, 2004 compared to $1.6 million for the June 30, 2003. The decrease of
$816,000 was primarily due to the Company decrease in loan production and
efforts to streamline its corporate costs. Other general and administrative
expenses were primarily made up of rent, advertising services, fees for
professional services, insurance and office expenses. These expenses decreased
$313,000 to $1.2 million for the quarter ended June 30, 2004 from $1.5 million
for the same period in 2003. Ocean West had a net loss of $516,000 for the quarter ended June 30, 2004
compared to a net income of $239,000 for the same quarter of 2003. The
significant decrease in income for the June 30, 2004 quarter was due to a
decrease in loan volume partially offset by a decrease in general and
administrative expenses. Nine Months Ended June 30, 2004 Compared to the Nine Months Ended June 30, 2003 During the nine months ended June 30, 2004, Ocean West Enterprises made
2,594 loans with an aggregate dollar value of approximately $474 million
compared to 3,912 loans with an aggregate dollar value of approximately $708
million in the nine months ended June 30, 2003. The average loan size for the
nine month period ended June 30, 2004 and the nine month period ended June 30,
2003 was approximately $183,000 and $181,000, respectively. Most of the loans originated were in
principal amounts between $100,000 and $180,000. The Companys
decrease in loan volume was a direct result of current overall market
conditions as well as a decrease in working capital. 8




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Item 2. Managements Discussion and Analysis and Plan of Operation (continued) Net revenues from origination and/or sale of loans decreased to $6.2
million for the nine months ended June 30, 2004 from $9.7 million for the nine
months ended June 30, 2003. The decrease in revenues can be attributed to a
combination of the transfer of loan production for a period of two months to
Freedom Mortgage Corporation, which
then paid expenses for those loans for and a decrease in loan production as
well as current market conditions. Total operating expenses decreased by $1.5 million to $7.6 million for the
nine months ended June 30, 2004 from $9.1 million for the nine months ended
June 30, 2003. Salary, wages and payroll taxes were $3.0 million for the nine
months ended June 30, 2004 compared to $4.6 million for the nine months ended
June 30, 2003. The decrease of $1.6 million was primarily due to the transfer
of loan production to Freedom for a period of the two months and for a
decrease in costs associated with loan production of which were directly
related to the decrease in loans funded. 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
$92,000 to $4.4 million for the nine months ended June 30, 2004 from $4.3
million for the same period in 2003. Rent, insurance and related office
expenses increased slightly as the overall cost of doing business increased. Ocean West had a net loss of $1,410,000 for the nine month period ended
June 30, 2004 compared to net income of $606,000 for the same period of 2003.
The significant decrease in income for the nine month period ended on June 30,
2004 was due to a decrease in loan volume. 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 17.31% 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
4.35% and 9.86% 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 nine months ended June
30, 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 June 30, 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 8.25% and the rate on September 30, 2003 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 June 30, 2004 the outstanding balance with Provident Consumer
Financial Services and Warehouse One were $2,749,340 and $0 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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At June 30, 2004, the interest rate charged on our warehousing lines of
credit with Provident Consumer Financial Services and Warehouse One were
approximately 6.11% 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 June 30, 2004 was 1.1% based on dollar volume, compared to
3.41% for the three month period ended June 30, 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. On July 1,
2004, Consumer Direct of America, a Nevada corporation, purchased
1.5 million of senior preferred stock of Ocean West Holdings,
Inc., for an aggregate purchase price $1,500,000 in cash. 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 nine months of fiscal 2004 and 2003 we had net cash
provided by operating activities of $4.3 million and $12.7 million,
respectively. The primary sources of net cash provided by were a decrease in the
amount of mortgage loans held for sale and receivables from loans sold over the
nine month period ending June 30, 2004. The primary source of
the net cash provided by operating activities for the nine month period ended June 30, 2003 was a
decrease 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 nine months of
fiscal 2004 and 2003 was $11,000 and $16,000, respectively, which was
attributable to purchase property and equipment and the issuance of notes
receivable. Net cash used for financing activities for the nine months ended June 30,
2004 was $4.6 million. This consisted primarily of payments under the warehouse
lines of credit of $4.8 million, payments of $50,000 on capital lease
obligations, as well as dividends paid of $117,000 offset by borrowings of
$137,000 on debt and 189,000 on notes payable from stockholder. Net cash used
for financing activities for the nine months ended June 30, 2003 was $12.4
million. This consisted primarily of payments under the warehouse lines of
credit of $12.4 million. Repurchase of Series M preferred stock was $400,000.
Proceeds from sale of preferred stock were $500,000. Payments of $127,000 on
notes payable to stockholders, $90,000 on long-term debt, $82,800 on capital
lease obligations and borrowings of $300,000 from short-term debt as well as
dividends paid of $160,000 offset cash provided by financial activities for the
period. 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 $1,108,000 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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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 2. Changes in
Securities. On
July 1, 2004, Consumer Direct of America, a Nevada corporation,
purchased 1,500,000 shares of senior preferred stock of Ocean
West Holdings, Inc., a for an aggregate purchase price of $1,500,000
in cash. Since the offer and sale of the Shares have not been
registered under the Securities Act in reliance upon
Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder, the Purchaser will offer
or resell the Shares only in compliance with the provisions of all
applicable Federal and state securities laws and regulations. The
Purchaser will offer or resell such Shares only if such Shares are
registered under the Securities Act or an exemption from such
registration is available. Unless the Shares that are the subject of
such offer or sale are registered under the Securities Act or an
exemption from registration is available (in which latter case the
Company shall have received an opinion of counsel, in form and
substance reasonably satisfactory to the Company, to such effect),
the Company shall not permit the transfer of the Shares. 
 Item 3. Defaults Upon
Senior Securities. None. 
 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 16.  (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. On August 3, 2004, the Company filed a report n Form 8-K disclosing that
several of its shareholders exchanged 4,921,930 shares for 622,388 shares of
Consumer Direct of America, which resulted in a change of control whereby
Consumer Direct of America is a 84.9% holder of Ocean Wests stock. 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: August 23, 2004By:
    
    /s/ Marshall L. StewartMarshall L. Stewart
President and Chief Executive OfficerDate: August 23, 2004By:
    
    /s/ Daryl S. MeddingsDaryl S. Meddings
Executive 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 June 30, 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)(ii)
    
    Purchase and Sale of Capital Stock
Agreement, as filed on Form 8K dated August 3, 2004
    
    
    
    
    
    
    4.2(iii)
    
    Subscription Agreement between
Ocean West Holding Corporation and Consumer Direct of America, as
filed herewith
    
    
    
    
    
    
    4.3302 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