**SECURITIES
      AND EXCHANGE COMMISSION**




**WASHINGTON,
      D.C. 20549**




****FORM
      10-QSB****




**T** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**




For
      Quarter Ended June 30, 2006




**OR**




£  **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**




For
      the
      transition period from _______ to _______




Commission
      file number: 000-32307




SEA
      SUN CAPITAL CORPORATION


(Exact
      Name of Registrant as Specified in its Charter)


DELAWARE
              59-3518707State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization
              Identification
                  No.)




940
      Sheldon Court; Suite 201, Burlington, Ontario, Canada L7L 5K6


(Address
      of Principal Executive Office) (Zip Code)




(250)
      717-3003


(Registrant's
      telephone number including area code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports) and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes **£** No **T**




Indicate
      by check mark whether the Registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Act). Yes **£** No **T**





The
      number of shares of registrant's Common Stock, $.001 par value, outstanding
      as
      of November 30, 2006 was 20,565,141 shares.










**Sea
      Sun Capital Corporation and Subsidiary**





**Index**





Page
                No.Item
                1.
            Financial
                Statements
            3Consolidated
                Balance Sheet - June 30, 2006 - Unaudited
            3Consolidated
                Statements of Operations and Comprehensive Income (Loss) -three
                and six month periods ended June 30, 2006 and 2005 -
                Unaudited
            4Consolidated
                Statement of Cash Flows - six month periods endedJune
                30, 2006 and 2005 - Unaudited
            5Notes
                to Consolidated Financial Statements - Unaudited
            6Item
                2.
            Management's
                Discussion And Analysis of Financial Condition And
                Results Of Operations
            12Item
                3.
            Controls
                and Procedures
            17PART
                II - OTHER INFORMATIONItem
                6.
            Exhibits
                and Reports on Form 8-K
            17SIGNATURES
            
            18







**PART
        I - FINANCIAL INFORMATION:**
 **Item
        1.**  **Financial
        Statements**


**SEA
                  SUN CAPITAL CORPORATION****CONSOLIDATED
                  BALANCE SHEET****June
                  30, 2006****(UNAUDITED)****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              69,928Accounts
                  receivable - transfer of location agreements, current portion (Note
                  3)
              
              
              542,710Prepaid
                  expenses
              
              
              10,022Total
                  Current Assets
              
              
              622,660**PROPERTY
                  AND EQUIPMENT - NET**
              
              
              2,802,450**OTHER
                  ASSETS**Accounts
                  receivable - transfer of location agreements, long-term portion
                  (Note
                  3)
              
              
              3,344,200Intangible
                  asset (Note 5)
              
              
              366,357Total
                  Other Assets
              
              
              3,710,557**TOTAL
                  ASSETS**
              
              **$**
              **7,135,667****LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              36,875Accounts
                  payable - related parties
              
              
              196,055Accrued
                  liabilities
              
              
              201,593Total
                  Current Liabilities
              
              
              434,523**LONG-TERM
                  LIABILITIES**Deferred
                  income taxes
              
              
              1,065,573**TOTAL
                  LIABILITIES**
              
              
              1,500,096**STOCKHOLDERS'
                  EQUITY**Preferred
                  stock, $0.001 USD par value; 50,000,000 sharesauthorized,
                  no shares issued and outstanding (Note 4)
              
              
              -Common
                  stock, $0.001 USD par value; 100,000,000 sharesauthorized,
                  20,490,141 shares issued and outstanding (Note 4)
              
              
              20,490Additional
                  paid-in capital
              
              
              3,398,414Retained
                  earnings
              
              
              1,979,106Foreign
                  currency translation adjustment
              
              
              237,461Total
                  Stockholders' Equity
              
              
              5,635,471**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              **$**
              **7,135,567**





See
      notes
      to financial statements




3


**SEA
                    SUN CAPITAL CORPORATION****CONSOLIDATED
                    STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                    (LOSS)****(UNAUDITED)****For
                    the Three Months**
                
                **For
                    the Six Months****Ended
                    June 30,**
                
                **Ended
                    June 30,****2006**
                
                **2005**
                
                **2006**
                
                **2005****REVENUE**
                
                $
                8,933,400
                
                $
                -
                
                $
                8,933,400
                
                $
                -**OPERATING
                    EXPENSES**Location
                    sales costs (Note 3)
                
                
                387,246
                
                
                -
                
                
                1,221,288
                
                
                -Wages
                    and contractor fees
                
                
                306,379
                
                
                67,118
                
                
                627,028
                
                
                162,670Professional
                    fees
                
                
                66,069
                
                
                40,036
                
                
                114,369
                
                
                56,314Depreciation
                
                
                138,315
                
                
                22,094
                
                
                269,946
                
                
                32,744Travel,
                    meals, and entertainment
                
                
                311
                
                
                10,540
                
                
                1,120
                
                
                19,838Research
                    and development
                
                
                9,773
                
                
                -
                
                
                19,378
                
                
                3,949Office
                    expenses
                
                
                98,113
                
                
                2,181
                
                
                194,682
                
                
                4,104Advertising
                
                
                4,655
                
                
                -
                
                
                4,655
                
                
                49Facilities
                    rent
                
                
                3,290
                
                
                -
                
                
                5,465
                
                
                -Other
                    general and administrative
                
                
                -
                
                
                16,381
                
                
                -
                
                
                31,506Total
                    Operating Expenses
                
                
                1,014,151
                
                
                158,350
                
                
                2,457,931
                
                
                311,174**INCOME
                    (LOSS) FROM OPERATIONS**
                
                
                7,919,249
                
                
                (158,350
                )
                
                6,475,469
                
                
                (311,174
                )**OTHER
                    INCOME**Gain
                    on sale of subsidiary
                
                
                10,000
                
                
                -
                
                
                10,000
                
                
                -Interest
                    income
                
                
                16
                
                
                31
                
                
                151
                
                
                41Total
                    Other Income
                
                
                10,016
                
                
                31
                
                
                10,151
                
                
                41**INCOME
                    (LOSS) BEFORE INCOME TAXES**
                
                
                7,929,265
                
                
                (158,319
                )
                
                6,485,620
                
                
                (311,133
                )**PROVISION
                    FOR INCOME TAXES**
                
                
                (1,065,673
                )
                
                -
                
                
                (1,065,673
                )
                
                -**NET
                    INCOME (LOSS)**
                
                **$**
                **6,863,592**
                
                **$**
                **(158,319**
                **)**
                **$**
                **5,419,947**
                
                **$**
                **(311,133**
                **)****BASIC
                    AND DILUTED:**Net
                    Income (Loss) per common share
                
                $
                0.34
                
                $
                (0.01
                )
                $
                0.27
                
                $
                (0.02
                )Weighted
                    average shares outstanding
                
                
                20,022,804
                
                
                18,433,415
                
                
                20,009,059
                
                
                17,689,454**OTHER
                    COMPREHENSIVE INCOME (LOSS)****NET
                    INCOME (LOSS)**
                
                $
                6,863,592
                
                $
                (158,319
                )
                $
                5,419,947
                
                $
                (311,133
                )Foreign
                    currency translation adjustment
                
                
                276,864
                
                
                (437
                )
                
                271,325
                
                
                7,469**COMPREHENSIVE
                    INCOME (LOSS)**
                
                $
                7,140,456
                
                $
                (158,756
                )
                $
                5,691,272
                
                $
                (303,664
                )




See
      notes to financial statements




4


**SEA
                  SUN CAPITAL CORPORATION****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****UNAUDITED****For
                  the Six Months****Ended
                  June 30,****2006**
              
              **2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income (loss)
              $
              5,419,947
              
              $
              (311,133
              )Adjustments
                  to reconcile net income to net cashused
                  in operating activities:Depreciation
              
              
              
              
              
              269,946
              
              
              32,744Stock
                  option compensation expense
              
              
              
              
              
              459,982
              
              
              -Non-cash
                  revenues from transfer and assignment of locations
              
              
              
              
              
              (8,933,400
              )
              
              -Provision
                  for income tax expense
              
              
              
              
              
              1,065,673
              
              
              -Changes
                  in operating assets and liabilities:Increase
                  in accounts receivable - other
              
              
              
              
              
              21,448
              
              
              -Decrease
                  in prepaid expenses
              
              
              
              
              
              15,222
              
              
              2,311Increase
                  (Decrease) in accounts payable
              
              
              
              
              
              (7,351
              )
              
              134,233Increase
                  (Decrease) in accounts payable - related parties
              
              
              
              
              
              78,775
              
              
              (57,758
              )Increase
                  in accrued liabilities
              
              
              
              
              
              (10,359
              )
              
              -Net
                  Cash Used by Operating Activities
              
              
              
              
              
              (1,620,117
              )
              
              (199,603
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchases
                  of fixed assets
              
              
              
              
              
              (1,037,182
              )
              
              (461,231
              )Net
                  Cash Used by Investing Activities
              
              
              
              
              
              (1,037,182
              )
              
              (461,231
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from long-term debt - location sales
              
              
              
              
              
              1,142,900
              
              
              408,035Proceeds
                  from common stock subscriptions
              
              
              
              
              
              -
              
              
              570,979Net
                  Cash Provided by Financing Activities
              
              
              
              
              $
              1,142,900
              
              $
              979,014**EFFECT
                  OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT**
              
              265,348
              
              
              7,469**NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
              $
              (1,249,051
              )
              $
              325,649**CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD**
              
              1,318,979
              
              
              213,771**CASH
                  AND CASH EQUIVALENTS, END OF PERIOD**
              **$**
              **69,928**
              
              **$**
              **539,420****SUPPLEMENTAL
                  CASH FLOW INFORMATION**Cash
                  Payments For:Interest
              
              
              
              
              $
              -
              
              $
              -Income
                  taxes
              
              
              
              
              $
              -
              
              $
              -Non-Cash
                  Investing and Financing Activities:Location
                  sales financed with notes receivables
              
              
              
              
              $
              717,500
              
              $
              1,220,365




See
      notes to financial statements




5


**SEA
        SUN CAPITAL CORPORATION**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Three and Six Month Periods Ended June 30, 2006 and
        2005**
 **(UNAUDITED)**







The
      accompanying unaudited interim financial statements have been prepared pursuant
      to the rules and regulations of the Securities and Exchange Commission and
      should be read in conjunction with the Company’s December 31, 2005 Annual Report
      on Form 10-KSB. Certain information and footnote disclosures normally included
      in the financial statements prepared in accordance with US Generally Accepted
      Accounting Principles have been omitted or condensed pursuant to such rules
      and
      regulations.




The
      unaudited financial statements include all normal recurring adjustments which
      are, in the opinion of our management, necessary to present a fair statement of the Company’s financial position as of June 30, 2006, the results
      of operations for the three and six months ended June 30, 2006 and 2005, and
      cash flows for the six months ended June 30, 2006 and 2005. Results of
      operations for these periods are not necessarily indicative of the results
      to be
      expected for the full year.





**Note
      1 - Organization**





Sea
      Sun
      Capital Corporation (the Parent) was organized as a blank check company under
      the laws of the state of Delaware as Alpha Holding, Inc. on August 19, 1997.
      A
      name change to Sea Sun Capital Corporation was effected September 29, 2004.
      The
      Parent engaged in minimal operations from its inception until December 16,
      2004,
      on which date it acquired 100% of the stock of Sea Sun Capital Corporation
      (the
      Subsidiary), which was organized under the laws of Alberta, Canada on February
      19, 2003. The acquisition was accounted for as a recapitalization, commonly
      referred to as a reverse merger, inasmuch as the post-acquisition owners and
      control persons of the Parent are substantially the same as the pre-acquisition
      owners and control persons of the Subsidiary. The financial statements reflect
      primarily the operations of the Subsidiary, with a recapitalization to
      illustrate the effects of the reverse merger. The consolidated entity is
      referred to throughout these notes as the Company.





The
      Company sells, rents and licenses the use of water leisure craft manufactured
      by
      unaffiliated entities pursuant to the Company’s proprietary designs and
      specifications to an unaffiliated master licensee and other ecotour operators
      located in domestic and international markets.





**Note
      2 - Basis of Presentation and Significant Accounting
      Policies**





Generally
      Accepted Accounting Principles - The
      accompanying financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States of America (US
      GAAP). This basis differs from that used in the statutory accounts of the
      Subsidiary, which were prepared in accordance with the accounting principles
      and
      relevant financial regulations applicable to enterprises in Canada. All
      necessary adjustments have been made to present the financial statements in
      accordance with US GAAP.





6





**SEA
      SUN CAPITAL CORPORATION**


**Notes
      to Consolidated Financial Statements**


**For
      the Three and Six Month Periods Ended June 30, 2006 and
      2005**


**(UNAUDITED)**


**Note
      2 - Basis of Presentation and Significant Accounting Policies
      (continued)**





Foreign
      Currency and Comprehensive Income - The
      Subsidiary’s functional currency is the Canadian dollar (CND), while the
      Parent’s functional currency is the United States dollar (USD).  The
      financial statements of the Subsidiary were translated to USD prior to
      consolidation using June 30, 2006 exchange rates for the balance sheet, and
      weighted average exchange rates over the three and six months ended June 30,
      2006 and 2005 for the statements of operations.  Foreign currency
      translation gains or losses as a result of fluctuations in the exchange rates
      are reflected in the Statement of Other Comprehensive Income or
      Loss.





Net
      Earnings Per Share - The
      computation of net income (loss) per share of common stock is based on the
      weighted average number of shares outstanding during the periods
      presented.





Income
      Taxes -
      The
      Company recognizes the tax effects of transactions in the year in which such
      transactions enter into the determination of net income, regardless of when
      reported for tax purposes. Deferred taxes are provided in the financial
      statements under SFAS No. 109, “Accounting for Income Taxes,” to give effect to
      the resulting temporary differences which may arise from differences in the
      bases of fixed assets, depreciation methods, allowances, etc., based on the
      income taxes expected to be payable in future years.





Cash
      and Cash Equivalents - For
      purposes of the statement of cash flows, the Company considers all highly liquid
      debt instruments purchased with a maturity of three months or less to be cash
      equivalents.  During the six months ended June 30, 2006, the Company did
      not have non-cash investing activities other than as disclosed on the statements
      of cash flows.





Use
      of
      Estimates - The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





Fixed
      Assets - Fixed
      assets are stated at cost less accumulated depreciation, which is computed
      using
      the straight-line method based on estimated useful lives ranging from two (2)
      to
      five (5) years. Long-term assets of the Company are reviewed annually to assess
      whether the carrying value has become impaired, according to the guidelines
      established in Statement of Accounting Standards (SFAS) No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets.”* The
      Company also evaluates the periods of amortization to determine whether
      subsequent events and circumstances warrant revised estimates of useful lives.
      No impairment of assets was recorded in the periods reported.




7


**SEA
        SUN CAPITAL CORPORATION**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Three and Six Month Periods Ended June 30, 2006 and
        2005**
 **(UNAUDITED)**





**Note
      2 - Basis of Presentation and Significant Accounting Policies
      (continued)**





Revenue
      Recognition - The
      Company has four sources of revenue pertaining to its revised business model;
      (1) Sales of watercraft products; (2) Initial licensing fees on locations
      financed by the Master Licensee; (3) Monthly rental income from the Master
      Licensee and (4) On-going licensing fees from the Master Licensee from locations
      financed by the Company.





Product
      Warranty Costs - The
      Company records a liability for product warranties at the time revenue is
      recognized. As the Company has no historical experience, the liability is
      estimated using management’s best judgment. The Company adjusts its liability
      for specific warranty matters when they become known and the exposure can be
      estimated. The Company’s warranty reserves are affected by product failure rates
      and material usage and labor costs incurred in correcting a product failure.
      If
      these estimated costs differ from actual costs, a revision to the warranty
      reserve would be required.





Accounts
      Receivable - The
      Company believes that its credit review procedures have adequately provided
      for
      usual and customary credit-related losses. The allowance account and accounts
      receivable are charged to bad debts expense when an amount is determined to
      be
      uncollectible based on a periodic review of the accounts by management. Based
      on
      the Company’s policy for charging off accounts receivables and the low risk of
      uncollectibility of Eco Tour License sales, the bad debts allowance is
      insignificant at June 30, 2006. In the future, the Company plans to sell its
      watercrafts to independent dealers, at which time the Company will set up an
      allowance based on estimation of uncollectible accounts.





**Note
      3 - Location Sales**





Prior
      to
      June 29, 2006, the Company continued to pursue the business plan it initiated
      in
      February 2003, i.e. ,
      the
      sale of investment opportunities in international maritime Ecotour Locations
      (the “Locations”) to individuals or entities (“Location Investors”).





The
      Company accounted for its Location sales prior to June 30, 2006 in accordance
      with EITF 88-18, *“Sales
      of Future Revenues,”* which
      requires the total Location sales price stated in the Agreements to be
      recognized not as revenue, but rather as debt that is amortized using the
      effective interest method. Since none of the Locations had commenced operations
      prior to June 30, 2006, no amortization has been recorded and the entire debt
      amount has been reported as long-term debt.





During
      the three month period ended June 30, 2006, the Company entered into two
      Location Agreements pertaining to two Locations, for which it became entitled
      to
      receive a total of $270,000, of which $126,000 was paid to the Company. During
      the six month period ended June 30, 2006, the Company entered into ten Location
      Agreements pertaining to 11 Locations, for which it became entitled to receive
      a
      total of $1,550,000, of which $853,500 was paid to the Company.




8




**SEA
        SUN CAPITAL CORPORATION**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Three and Six Month Periods Ended June 30, 2006 and
        2005**
 **(UNAUDITED)**


**Note
      3 - Location Sales (continued)**





During
      the six month period ended June 30, 2006, one location agreement was cancelled
      and another agreement was reduced from two location packages to one. Initial
      payments totaling $72,000 were returned to the investors. Also during that
      period, the Company received additional payments on existing Location Agreements
      totaling $433,400. As of June 30, 2006, the aggregate sales price of all
      Location Agreements was $8,933,400, and the related Location sales receivable
      was $3,886,910.





During
      the six months ended June 30, 2006 and 2005, the Company incurred expenses
      associated with the location sales of $1,221,288 and $0 respectively. The costs
      incurred during the 2006 period consisted of $1,176,722 in Location set-up
      fees,
      $20,608 in commissions and royalties, and $23,958 in freight. These costs were
      expensed, rather than capitalized, due to the uncertainty of their
      recoverability.





During
      the three months ended June 30, 2006 and 2005, the Company incurred expenses
      associated with the location sales of $387,246 and $0 respectively. The costs
      incurred during the 2006 period consisted of $362,608 in Location set-up fees,
      $5,832 in commissions and royalties, and $18,806 in freight.





On
      June
      29, 2006, the Company sold for a total consideration of $10,000 all of the
      outstanding shares of the capital stock of Sea Sun Enterprises, Inc. (“SSEI”), a
      wholly owned non-operating subsidiary organized under the laws of Barbados
      to
      two unaffiliated persons.





As
      of
      June 29, 2006, the Company had entered into 57 Location Agreements, representing
      76 Locations, resulting in total debt of $8,933,400, of which $3,886,910 was
      still receivable from the Location Investors at that time. On that
      date:





·
            the
                Company transferred and assigned all of its rights and interests
                in the
                Location Agreements to SSEI; and





·
            SSEI
                assumed responsibility for the operation of the Locations, including
                set-up, marketing, tour operations, revenue collection and payment
                of all
                expenses associated with the operations, and for the payment of initial
                licensing fees, monthly boat rental fees and monthly licensing fees
                to the
                Company.





The
      aggregate amount receivable represented the balance of the purchase prices
      payable for the Locations to the Company by SSEI as follows: the sum of $432,865
      was due on August 31, 2006; the sum of $109,845 was due on September 30, 2006;
      and the balance of $3,344,200 is payable in 24 equal monthly payments of
      $148,106 (including interest of 6% per annum accrued monthly) commencing January
      1, 2007.





9




**SEA
        SUN CAPITAL CORPORATION**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Three and Six Month Periods Ended June 30, 2006 and
        2005**
 **(UNAUDITED)**


**Note
      4 - Stockholders’ Equity**





In
      February 2006, the Company issued 266,300 shares of its common stock at $.40
      per
      share in connection with the exercise of warrants that were outstanding at
      December 31, 2005.





In
      June
      2006, the Company issued 228,680 shares of common stock at $1.00 per share
      to
      acquire watercraft patent rights (Note 5).




The
      Company is authorized to issue 50,000,000 shares of its preferred stock and
      100,000,000 shares of its common stock, both with a $.001 par value.  The
      Company has not issued any preferred stock. On June 30, 2006, there were
      20,490,141 shares of common stock outstanding.





**Note
      5 - Intangible Asset**





In
      December 2003, the Company acquired watercrafts and accessories with a fair
      market value of $196,490 CND from an entity with which the Company’s director is
      affiliated.  The Company paid the entity $350,000 CND, which resulted in an
      intangible asset of $153,510 CND.  The intangible asset consists of
      marketing and other efforts made by the entity to establish brand recognition
      of
      the Company’s product.  Using the exchange rate at June 30, 2006, the
      intangible asset had a value of $137,677.  Minimal (if any) impairment in
      accordance with SFAS #142, ‘ *Goodwill
      and Other Intangible Assets* ,’
was
      noted, and therefore, not recorded.





In
      June
      2006, the Company issued 228,680 shares of common stock to acquire the patent
      rights of the Sea Vu, one of the watercraft utilized in the Company’s Ecotours.
      The stock’s fair market value was determined by management to be $1.00 per
      share, resulting in an intangible asset of $228,680.





**Note
      6 - Accounts Payable - Related Parties**





An
      entity
      affiliated with one of the Company’s directors regularly pays for expenses on
      the Company’s behalf.  The Company accumulated reimbursements owed to that
      entity of $196,055 at June 30, 2006.





**Note
      7 - Stock Options**





In
      December 2005, options to purchase 1,000,000 shares of common stock were granted
      to various consultants under the company's Stock Option and Stock Appreciation
      Rights Plan (the "2005 Plan"). The 2005 Plan provides for the granting to
      officers, directors, employees and consultants of incentive and non-incentive
      stock options to purchase not more than 2,000,000 shares of common stock and
      stock appreciation rights. The Board of Directors administers the Plan and
      has
      authority to determine the persons to whom awards will be made, the terms of
      vesting and forfeiture, the amount of the awards, and other terms. At June
      30,
      2006, a total of 1,000,000 options had been granted under the 2005 Plan, none
      of
      which had been exercised.





10




**SEA
        SUN CAPITAL CORPORATION**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Three and Six Month Periods Ended June 30, 2006 and
        2005**
 **(UNAUDITED)**





**Note
      7 - Stock Options (continued)**





Also
      in
      December 2005, options to purchase an aggregate of 1,000,000 shares of common
      stock were granted to three executives pursuant to the terms of their respective
      employment agreements. These options are not administered under the 2005
      Plan.





The
      Company has adopted the fair value recognition provisions of SFAS No. 123(R),
      under which compensation expense of $229,991 and $459,982 was recognized during
      the three and six months ended June 30, 2006, respectively. Compensation expense
      for all options not yet vested as of June 30, 2006 was based on the estimated
      fair value of the options on the grant date. The Company uses the Black-Scholes
      option-pricing model to compute compensation expense associated with the
      options. The risk-free interest rate is based on the U.S. Treasury rates at
      the
      date of grant. The forfeiture rate is based on past turnover experience of
      the
      Company. Expected volatility is based on the historical volatility of the
      Company’s stock. The options granted were valued assuming a risk-free interest
      rate between 4% and 5% per annum, volatility between 95% and 100%, zero dividend
      yield and forfeiture rate, and expected lives of ten years. The total grant
      date
      fair value price of the options was $1,839,926.




The
      Company records stock compensation expense over the vesting period, which is
      generally two years. As of June 30, 2006, the Company had approximately
      $1,379,944 of unrecognized compensation expense that is expected to be
      recognized over the remaining vesting period of approximately 1.5 years. That
      expectation does not take into account the potential effects of equity awards
      that may be granted in subsequent periods.




There
      were 2,000,000 equity awards outstanding at June 30, 2006 with a remaining
      life
      of 9.5 years, an exercise price of $.75 and an intrinsic value of $.25. There
      were no fully vested options outstanding at June 30, 2006, and no options were
      granted or exercised during the six months ended June 30, 2006.





11





**Item
      2.**  **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**





The
      following discussion and analysis provides information which our management
      believes is relevant to an assessment and understanding of our results of
      operations and financial condition. This discussion should be read in
      conjunction with the financial statements and notes thereto appearing elsewhere
      in this report.





**Our
      History**





Prior
      to
      September 30, 2004, we were called Alpha Holding, Inc. On that date, we amended
      our certificate of incorporation to change our name to Sea Sun Capital
      Corporation, and to increase our authorized capitalization to 100 million $.001
      par value common shares and 50 million $.001 par value preferred shares.





On
      December 16, 2004, we and Sea Sun Capital Corporation, or Sea Sun Alberta,
      a
      private corporation incorporated under the Business Corporations Act of Alberta,
      Canada, completed a reverse merger in the form of a stock purchase transaction.
      As a result of that transaction, Sea Sun Alberta became our wholly owned
      subsidiary, and the former shareholders of Sea Sun Alberta and related parties
      became the owners of approximately 90% of our issued and outstanding common
      stock.





**Our
      Original Business Model**





In
      2003,
      Sea Sun Alberta began pursuing a business model that was based upon the sale
      of
      investment opportunities in international maritime eco-tour locations, or
      locations, to various individuals and entities who we will collectively call
      the
      location investors. Pursuant to the agreements that each location investor
      entered into with Sea Sun Alberta, the location investor was:





●
            required
                to pay a sales price for the location which typically ranged from
                $100,000
                - $150,000, to fund the:





§
            production
                of the glass-bottom watercraft manufactured pursuant to Sea Sun’s
                proprietary designs and specifications to be employed at the locations;
                and





§
            set-up
                of, and the licensing and marketing for, the locations, and





●
            entitled
                to receive between 30% and 40% of the net revenues (gross revenues
                less
                selling commissions) generated from the ongoing operations from the
                specific location in which the location investor had invested.





Sea
      Sun
      Alberta also began to manufacture, through unaffiliated parties, the watercraft
      to be delivered to each location, obtained, where necessary, the permits and
      licensing required by certain jurisdictions, undertook to engage the services
      of
      qualified eco-tour operators at each location, and also began to perform the
      accounting and other administrative functions for each location.





12


Prior
      to
      June 29, 2006, we accounted for all revenues derived from the location
      agreements we entered into in 2005 in accordance with EITF Issue
      88-18, *“Sales
      of Future Revenues,”* which
      requires all sums payable to us pursuant to those Agreements to be recognized
      not as revenue, but rather as debt to be amortized using the effective interest
      method. Since none of the locations commenced operations prior to that date,
      pursuant to EITF Issue 88-18, no amortization would have been recorded in that
      period, and the entire debt amount would have been treated as long-term debt.





**Our
      Present Business Model**





On
      June
      29, 2006, we entered into a master license agreement with Sea Sun Enterprises,
      Inc., or SSEI, a Barbados corporation that we do not own or control, and whose
      owners are not affiliated with us. Pursuant to that agreement:





·
            we
                granted to SSEI a worldwide license to develop and operate Sea Sun
                eco-tour business operations and to use our intellectual property
                in
                connection with those operations;





·
            SSEI
                became fully responsible for establishing and operating, either directly
                or through local water sports location operators trained and supervised
                by
                it, Sea Sun eco-tour operations at all of the locations that we had
                agreed
                to set up pursuant to the assigned location agreements and at all
                new
                locations to be established; and





·
            SSEI
                agreed to pay us boat rental fees and license fees with regard to
                the use
                of our watercraft and intellectual property in connection with the
                eco-tour operations to be conducted at the
                locations.





At
      the
      same time, we entered into a transfer and assignment agreement with SSEI
      pursuant to which:





·
            we
                assigned all of our rights and interests in





§
            the
                47 location agreements that we had entered into in 2005, plus 10
                additional location agreements that we entered into in 2006;
                and





§
            all
                accounts receivable due and owing to us pursuant to those agreements;
                and





·
            SSEI
                agreed to pay us, in consideration of such assignment, $3,886,910
                in
                various installments over a period of three
                years.





Inasmuch
      as we no longer hold any of the Location Agreements as assets, and SSEI is
      now
      responsible for the operation of the locations, including set-up, marketing,
      tour operations and revenue collection activities, and is obligated to pay
      all
      expenses associated with those operations, EITF Issue 88-18 no longer applies
      to
      us.





**Revenues**





We
      did
      not enter into any agreements for the sale of locations with any location
      investors during the first half of the six month period ended June 30, 2005.
      During the three month period ended June 30, 2005, we entered into nine Location
      Agreements pertaining to 18 Locations, for which we became entitled to receive
      a
      total of $1,868,400, of which $408,035 was paid to us.





13


During
      the three month period ended June 30, 2006, we entered into two Location
      Agreements pertaining to two Locations, for which we became entitled to receive
      a total of $270,000, of which $126,000 was paid to us. During the six month
      period ended June 30, 2006, we entered into ten Location Agreements pertaining
      to 11 Locations, for which we became entitled to receive a total of $1,550,000,
      of which $853,500 was paid to us.





During
      the six month period ended June 30, 2006, one location agreement was cancelled
      and the number of *SEA
      SPI* watercraft due under another agreement was reduced. Initial payments totaling
      $72,000 were returned to investors during that period. Also during that period,
      we received additional payments on existing Location Agreements totaling
      $433,400.





As
      of
      June 29, 2006, we had entered into a total of 57 Location Agreements,
      representing 76 Locations. Due to the change in our business model described
      above, commencing with the statements of our operations for the three and six
      month periods ended June 30, 2006, the $8,933,400, of which $3,886,910 was
      still
      receivable from the Location Investors at that time. On that date:





·
            we
                transferred and assigned all of ours rights and interests in the
                Location
                Agreements to SSEI;





·
            SSEI
                assumed responsibility for the operation of the Locations, including
                set-up, marketing, tour operations, revenue collection and payment
                of all
                expenses associated with the operations, and for the payment of initial
                licensing fees, monthly boat rental fees and monthly licensing fees
                to us;
                and





·
            In
                consideration for that transfer and assignment, SSEI agreed to pay
                us
                $3,886,910 payable, as follows: $432,865 on August 31, 2006; $109,845
                on
                September 30, 2006; and the balance of $3,344,200 in 24 equal monthly
                payments of $148,106 (including interest of 6% per annum accrued
                monthly)
                commencing January 1, 2007.





**Operating
      Expenses**





During
      the three months ended June 30, 2006, our operating expenses were approximately
      $1,014,000 as compared to approximately $158,000 during the comparable period
      of
      2005. The almost six-fold increase was primarily due to:





·
            an
                increase of approximately $387,000 (from $0.00 in the second quarter
                of
                2005) in location sales costs,





·
            an
                increase of approximately $239,000 (from approximately $67,000 in
                the
                second quarter of 2005) in wages and contractor
                fees,





·
            an
                increase of approximately $116,000 (from approximately $22,000 during
                the
                quarter ended June 30, 2005) in depreciation;





·
            an
                increase of approximately $96,000 (from approximately $2,000 in the
                second
                quarter of 2005) in office expenses,
                and





·
            a
                decrease of approximately $16,000 (to $0.00 in the second quarter
                of 2005)
                in other general and administrative
                expenses.




14




During
      the six months ended June 30, 2006, our operating expenses were approximately
      $2,458,000 as compared to approximately $311,000 during the comparable period
      of
      2005. The almost eight-fold increase was primarily due to:





·
            an
                increase of approximately $1,221,000 (from $0.00 during the first
                six
                months of 2005) in location sales
                costs,





·
            an
                increase of approximately $464,000 (from approximately $163,000 during
                the
                first six months of 2005) in wages and contractor
                fees,





·
            an
                increase of approximately $237,000 (from approximately $33,000 during
                the
                six months ended June 30, 2005) in depreciation;





·
            an
                increase of approximately $191,000 (from approximately $4,000 during
                the
                first six months of 2005) in office expenses,
                and





·
            a
                decrease of approximately $32,000 (to $0.00 in the second quarter
                of 2005)
                in other general and administrative
                expenses.





**Income
      from Operations**





We
      recorded income from operations during the three months ended June 30, 2006
      of
      approximately $7,919,000, compared to a loss of approximately $158,000 during
      the comparable period of 2005. That reversal resulted from the recognition
      of
      revenues that were previously classified as debt, as a result of our transfer
      and assignment of the 57 Location Agreements to SSEI.





The
      same
      transfer and assignment transaction resulted in our recording of approximately
      $6,500,000 of operating income during the six month period ended June 30, 2006,
      as compared to an operating loss of approximately $311,000 during the same
      period in 2005.





**Currency
      Exchange Rate Effects**





We
      did
      not incur any currency exchange rate gains or losses during the three and month
      periods ended June 30, 2006 and 2005. However, Sea Sun Alberta’s functional
      currency is the Canadian dollar, while our functional currency is the United
      States dollar. Sea Sun Alberta’s financial statements were translated to US
      dollars prior to consolidation using period-end exchange rates for the balance
      sheet, and weighted average exchange rates for the statements of operations.
      Equity transactions were translated using historical rates. This resulted in
      positive foreign currency translation adjustments of approximately $277,000
      and
      $271,000 for the three and six month periods ended June 30, 2006, a negative
      adjustment of approximately $400 for the three months ended June 30, 2005 and
      a
      positive adjustment of approximately $7,500 for the six months ended June 30,
      2005.





15




**Income
      Taxes**





We
      have
      estimated our annual effective tax rate at 35% based on our estimate of the
      utilization of existing net operating loss carryforwards to offset any pre-tax
      income we may generate.





**Net
      Income (Loss) Per Share**





Our
      basic
      and diluted net income per share for the quarter and six months ended June
      30,
      2006 were $0.34 and $0.27, respectively, compared to a basic and diluted net
      loss of $0.01 and $0.02, respectively, per share for the comparable periods
      of
      2005. ****





**Liquidity
      and Capital Resources**





At
      June
      30, 2006, we held approximately $70,000 in cash and cash equivalents, and we
      had
      approximately $543,000 in current accounts receivable. The decrease in cash
      and
      cash equivalents of approximately $1,249,000 since December 31, 2005 resulted
      primarily from the payment of operating expenses, the purchase of fixed assets
      (boats) and the costs of retrofitting approximately 300 *Sea
      Spi* s
      with a
      new propulsion system.





Our
      working capital at June 30, 2006 was approximately $188,000 as compared to
      approximately $2,877,000 at year-end December 31, 2005. This decrease primarily
      was a result of the purchase of fixed assets ($1,000,000); an increase in
      current liabilities ($61,000) and payment of operating expenses.





Our
      net
      cash used in operating activities during the six months ended June 30, 2006
      was
      approximately $1,620,000. That usage resulted primarily from the increase in
      operating expenses resulting from our location sales, which required substantial
      increases in wages and contractor fees, professional fees, and office expenses.
      Cash used in investing activities during the first half of 2006 was
      approximately $1,037,000, all of which was attributable to capital expenditures
      for purchasing and retrofitting watercraft.





Cash
      provided by financing activities of approximately $1,143,000 for the six months
      ended June 30, 2006 resulted entirely from our Location sales.





We
      do not
      have any revolving credit or other sources of debt financing. Furthermore,
      we do
      not intend to enter into any new location sales agreements. We believe that
      current levels of cash and cash equivalents, together with cash from operations,
      will be sufficient to meet our capital requirements for the next 12
      months.





**Forward-Looking
      Statements**





Some
      of
      the statements made in this Form 10-QSB are forward-looking in nature, including
      but not limited to our business strategy, marketing assumptions, product
      development, plans concerning the commercialization of products, certain
      financial information and other statements that are not historical facts. The
      occurrence of the events described, and the achievement of the intended results
      are subject to the future occurrence of certain events and scientific results,
      some or all of which are not predictable or within our control. Therefore,
      actual results may differ materially from those anticipated in any
      forward-looking statements.





16




**Item
      3.**  **Controls
      and Procedures**





The
      Company’s management evaluated, with the participation of the Chief Executive
      Officer and Chief Financial Officer, the effectiveness of the Company’s
      disclosure controls and procedures as of the end of the period covered by this
      report. Based on that evaluation, the Chief Executive Officer and Chief
      Financial Officer have concluded that the Company’s disclosure controls and
      procedures were effective as of the end of the period covered by this
      report.  There has been no change in the Company’s internal control over
      financial reporting that occurred during the quarter covered by this report
      that
      has materially affected, or is reasonably likely to materially affect, the
      Company’s internal control over financial reporting.





**PART
      II - OTHER INFORMATION**





**Item
      6**  **Exhibits**





Exhibits31.1
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002




17





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report on Form 10-QSB for the Quarter ended June 30, 2006
      to be
      signed on its behalf by the undersigned thereunto duly authorized.


November
      30, 2006




SEA
              SUN CAPITAL
              CORPORATIONBy:
            /s/ Graham
              MillingtonGraham Millington, Chief Executive
              Officer


By:
            /s/ Gregory
              N.
              HellerGregory N. Heller, Chief Financial
              Officer




18


**Exhibit
      Index**




31.1
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002