UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington, D.C.
20549





FORM
10-Q/A


(Amendment
No. 1)




QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d)


OF
THE SECURITIES EXCHANGE ACT OF 1934


FOR
THE FISCAL QUARTER ENDED MARCH 31, 2008




COMMISSION
FILE NO.: 0-52356




SEAWAY
VALLEY CAPITAL CORPORATION





(Exact
name of registrant as specified in its charter)





Delaware
            20-5996486(State
      of other jurisdiction of
            (IRS
      Employerincorporation
      or organization
            Identification
      No.)











10-18
      Park Street, 2nd Floor, Gouverneur, N.Y. 13642
            13642(Address
      of principal executive offices)
            (Zip
      Code)








(315) 287-1122(Registrant's
      telephone number including area
code)






Check
mark whether the issuer (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant as required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes X
No __.






Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check One)




Large
accelerated filer Accelerated
filer__  Non-accelerated filer Small
reporting company_X_




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




The
number of outstanding shares of common stock as of May 19, 2008 was:1,151,419,415






This
amendment is being filed to more accurately reflect the acquisition of WiseBuys
Stores Inc.  Upon further review, the Company determined that the
acquisition of WiseBuys Store Inc. was not a merger under common control as
previously reported, since the CEO did not hold a majority interest in the
Company at the time of acquisition. Accordingly, the Company has restated its
financial statements to include the operations of Wisebuys Stores Inc. only
subsequent to the acquisition date and to recognize the excess purchase price
over the fair value of the net assets acquired as goodwill.







PART
I - FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS (UNAUDITED)





SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETAS
      OF MARCH 31, 2008 (UNAUDITED) AND DECEMBER 31, 2007ASSETS
            
            March
      31, 2008
            
            
            December
      31, 2007Current
      assets:Cash
            
            $
            988,165
            
            
            $
            1,116,003Accounts
      receivable
            
            
            212,583
            
            
            
            323,357Inventories
            
            
            5,540,752
            
            
            
            6,194,051Notes
      receivable
            
            
            2,200,000
            
            
            
            1,200,000Marketable
      securities, trading
            
            
            210,787
            
            
            
            158,353Prepaid
      expenses and other assets
            
            
            56,765
            
            
            
            48,990Refundable
      income taxes
            
            
            226,026
            
            
            
            320,032Total
      current assets
            
            
            9,435,078
            
            
            
            9,360,786Property
      and equipment, net
            
            
            3,721,462
            
            
            
            3,787,485Other
      Assets:Deferred
      financing fees
            
            
            556,805
            
            
            
            82,301Other
      Assets
            
            
            399,237
            
            
            
            387,226Excess
      purchase price
            
            
            8,988,102
            
            
            
            8,988,102Security
      deposits
            
            
            32,300
            
            
            
            32,300Total
      other assets
            
            
            9,976,444
            
            
            
            9,489,929TOTAL
      ASSETS
            
            
            23,132,984
            
            
            
            22,638,200LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      liabilities:Line
      of credit
            
            
            2,442,169
            
            
            
            925,000Accounts
      payable
            
            
            1,675,955
            
            
            
            3,133,707Accrued
      expenses
            
            
            830,424
            
            
            
            719,099Current
      portion of long term debt
            
            
            3,166,303
            
            
            
            3,075,869Convertible
      debentures
            
            
            1,529,622
            
            
            
            946,328Derivative
      liability - convertible debentures
            
            
            3,291,906
            
            
            
            878,499Total
      current liabilities
            
            
            12,936,379
            
            
            
            9,678,502Long
      term debt, net of current
            
            
            3,141,429
            
            
            
            4,800,874Convertible
      debentures payable, net - long term
            
            
            2,117,887
            
            
            
            1,177,669Due
      to related parties
            
            
            12,500
            
            
            
            12,500Total
      liabilities
            
            
            18,208,195
            
            
            
            15,669,545Commitments
      and contingencies
            
            
            -
            
            
            
            -STOCKHOLDERS'
      EQUITYSeries
      A voting preferred stock, $.0001 par value; 100,000shares
      authorized; no shares issued and outstanding
            
            
            -
            
            
            
            -Series
      B voting preferred stock, $.0001 par value; 100,000shares
      authorized; 81,250 shares issued and outstanding
            
            
            10
            
            
            
            10Series
      C voting preferred stock, $.0001 par value; 4,800,000shares
      authorized; 1,458,236 shares issued and outstanding
            
            
            146
            
            
            
            146Common
      stock, $0.0001 par value, 2,500,000,000 authorized;891,391,917
      shares issued and outstanding
            
            
            103,062
            
            
            
            89,139Additional
      paid-in capital
            
            
            12,759,859
            
            
            
            11,887,290Accumulated
      deficit
            
            
            (7,938,285
            )
            
            
            (5,007,929
            )Total
      stockholders' equity
            
            
            4,924,789
            
            
            
            6,968,653TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIENCY
            
            $
            23,132,984
            
            
            $
            22,638,200The
      notes to the consolidated financial statements are an integral part of
      these statements.








2




SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF INCOMEFOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)2008
            
            
            2007Revenue
            
            $
            3,136,212
            
            
            $
            -Cost
      of revenue
            
            
            2,397,841
            
            
            
            -Gross
      profit
            
            
            738,371
            
            
            
            -Gain
      on sale of securities, net
            
            
            52,932
            
            
            
            -Operating
      expenses:Selling,
      general and administrative expenses
            
            
            2,282,462
            
            
            
            1,810,654Total
      operating expenses
            
            
            2,282,462
            
            
            
            1,810,654Operating
      loss
            
            
            (1,491,159
            )
            
            
            (1,810,654
            )Other
      income (expense):Unrealized
      gain (loss) on derivative instruments
            
            
            (932,069
            )
            
            
            (983,455
            )Interest
      expense
            
            
            (497,919
            )
            
            
            -Interest
      income
            
            
            37,392
            
            
            
            -Other
      income (expense)
            
            
            (46,601
            )
            
            
            -Total
      other income (expense)
            
            
            (1,439,197
            )
            
            
            (983,455
            )Loss
      from continuing operations
            
            
            (2,930,356
            )
            
            
            (2,794,109
            )Discontinued
      operationsLoss
      on disposal of discontinued operations
            
            
            -
            
            
            
            (95,956
            )Loss
      from discontinued operations
            
            
            -
            
            
            
            (1,932,194
            )Total
      discontinued operations
            
            
            -
            
            
            
            (2,028,150
            )Loss
      before provision for income taxes
            
            
            (2,930,356
            )
            
            
            (4,822,259
            )Provision
      for (benefit from) income taxes
            
            
            -
            
            
            
            -Net
      loss
            
            $
            (2,930,356
            )
            
            $
            (4,822,259
            )Basic
      and diluted loss per share-continuing
            
            $
            0.00
            
            
            $
            (0.04
            )Basic
      and diluted loss per share-discontinued
            
            
            0.00
            
            
            
            (0.02
            )Basic
      and diluted loss per share
            
            $
            0.00
            
            
            $
            (0.06
            )Weighted
      average of shares of common stockoutstanding,
      basic
            
            
            951,098,332
            
            
            
            75,211,131The
      notes to the consolidated financial statements are an integral part of
      these statements.







3





SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)2008
            
            
            2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Continuing
      OperationsNet
      loss from continuing operations
            
            $
            (2,930,356
            )
            
            $
            (2,794,109
            )Adjustments
      to reconcile net loss to net cash used incontinuing
      operating activities:Depreciation
      and amortization
            
            
            108,902
            
            
            
            -Gain
      on marketable securities
            
            
            (52,434
            )
            
            
            -Unrealized
      loss on derivatives
            
            
            932,069
            
            
            
            983,455Amortization
      of deferred financing fees
            
            
            35,496
            
            
            
            -Stock
      based compensation
            
            
            -
            
            
            
            1,810,654Amortization
      of debt discount
            
            
            236,008
            
            
            
            -Change
      in assets and liabilities:Accounts
      receivable
            
            
            110,774
            
            
            
            -Inventory
            
            
            653,299
            
            
            
            -Prepaid
      expenses and other assets
            
            
            86,231
            
            
            
            -Deferred
      income taxes
            
            
            -
            
            
            
            -Other
      assets
            
            
            -
            
            
            
            -Security
      deposits
            
            
            (12,011
            )
            
            
            -Accounts
      payable
            
            
            (1,457,754
            )
            
            
            -Accrued
      expenses
            
            
            102,790
            
            
            
            -Cash
      Used in Continuing Operating Activities
            
            
            (2,186,986
            )
            
            
            -Discontinued
      operationsNet
      loss from discontinued operations
            
            
            -
            
            
            
            (2,028,130
            )Adjustments
      to reconcile net loss to net cashprovided
      by discontinued operating activitiesDepreciation
      and amortization
            
            
            -
            
            
            
            19,430Loss
      from discontinued operations
            
            
            -
            
            
            
            -Unrealized
      loss on derivative instruments
            
            
            -
            
            
            
            1,406,250Amortization
      of debt discount
            
            
            -
            
            
            
            130,710Change
      in assets and liabilitiesAccrued
      liabilities
            
            
            -
            
            
            
            42,452Cash
      Used in Discontinued Operating Activities
            
            
            -
            
            
            
            (429,288
            )Cash
      Used in Operating Activities
            
            
            (2,186,986
            )
            
            
            (429,288
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of marketable securities
            
            
            -
            
            
            
            -Purchase
      of property and equipment
            
            
            (42,879
            )
            
            
            -Cash
      used in investing activities
            
            
            (42,879
            )
            
            
            -The
      notes to the consolidated financial statements are an integral part of
      these statements.




4




SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing fees
            
            
            (260,000
            )
            
            
            -Borrowings
      on line of credit
            
            
            2,392,169
            
            
            
            -Repayments
      to related parties - discontinued
            
            
            -
            
            
            
            (512,013
            )Proceeds
      from issuance of preferred stock - subsidiary
            
            
            -
            
            
            
            -Proceeds
      from convertible debentures
            
            
            175,000
            
            
            
            -Proceeds
      from convertible debentures - discontinued
            
            
            -
            
            
            
            1,000,000Repayment
      of long term debt
            
            
            (205,142
            )
            
            
            -Cash
      provided by used in financing activities
            
            
            2,102,027
            
            
            
            487,987Net
      Decrease in Cash
            
            
            (127,838
            )
            
            
            58,699Cash
      at Beginning of Period
            
            
            1,116,003
            
            
            
            188Cash
      at End of Period
            
            $
            988,165
            
            
            $
            58,887Cash
      paid during the period for:Interest
            
            $
            226,415
            
            
            $
            -Income
      taxes
            
            $
            -
            
            
            $
            -SUPPLEMENTAL
      STATEMENT OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Acquisition
      of Technology License
            
            $
            -
            
            
            $
            211,328Assets
      acquired by issuance of equity
            
            $
            -
            
            
            $
            33,825Conversion
      of convertible debt and accrued interest
              into
      common stock
            
            $
            158,322
            
            
            $
            66,610Warrants
      issued with debt
            
            $
            728,170
            
            
            $
            712,125Convertible
      debentures issued in exchange for notes payable
            
            $
            2,299,662
            
            
            $
            -Discount
      issued upon issuance of derivative
            
            $
            2,049,957
            
            
            $
            -The
      notes to the consolidated financial statements are an integral part of
      these statements.




5





SEAWAY VALLEY CAPITAL CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2008


(UNAUDITED)




NOTE
1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all normal recurring adjustments considered necessary for a fair
statement of the results of operations have been included. The results of
operations for the three months ended March 31, 2008 are not necessarily
indicative of the results of operations for the full year. When reading the
financial information contained in this Quarterly Report, reference should be
made to the financial statements, schedule and notes contained in the Company's
Amended Annual Report on Form 10-KSB/A for the year ended December 31,
2007.





NOTE
2- GOING CONCERN




The financial statements have been prepared using accounting
principles generally accepted in the United States of America applicable for a
going concern, which assumes that the Company will realize its assets and
discharge its liabilities in the ordinary course of business. As of March 31,
2008, the Company has generated revenues of $3.1 million but has incurred a net
loss of approximately $2.9 million. Its ability to continue as a going concern
is dependent upon achieving sales growth, reduction of operation expenses and
ability of the Company to obtain the necessary financing to meet its obligations
and pay its liabilities arising from normal business operations when they come
due, and upon profitable operations. The outcome of these matters cannot be
predicted with any certainty at this time and raise substantial doubt that the
Company will be able to continue as a going concern. These financial statements
do not include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.




The
Company intends to overcome the circumstances that impact its ability to remain
a going concern through an increase of revenues, with interim cash flow
deficiencies being addressed through additional equity and debt financing. The
Company's ability to obtain additional funding will determine its ability to
continue as a going concern. There can be no assurances that these plans for
additional financing will be successful. Failure to secure additional financing
in a timely manner and on favorable terms if and when needed in the future could
have a material adverse effect on the Company's financial performance, results
of operations and stock price and require the Company to implement cost
reduction initiatives and curtail operations. Furthermore, additional equity
financing may be dilutive to the holders of the Company's common stock, and debt
financing, if available, may involve restrictive covenants, and may require the
Company to relinquish valuable rights.




NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Deferred
Financing Fees and Debt Discounts





Deferred
finance costs represent costs which may include direct costs paid to or warrants
issued to third parties in order to obtain long-term financing and have been
reflected as other assets. Costs incurred with parties who are providing the
actual long-term financing, which  generally  may  include
 the value of warrants,  fair value of the  derivative
 conversion  feature,  or the intrinsic value of beneficial
conversion features associated with the underlying debt, are reflected as a debt
discount.  These costs and discounts are generally amortized over the life
of the related debt.  In connection with debt issued during the three
months ended March 31, 2008, the Company recorded debt discounts totaling
$1,825,279. Amortization expense related to these costs and discounts were
$252,633 for the three months ended March 31, 2008, including $236,008 in debt
discount amortization included in interest expense on the Statement of
Operations.




Derivative
Financial Instruments




Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended and EITF Issue No. 00-19,
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock" require all derivatives to be recorded on the
balance sheet at fair value. The embedded derivatives are separately valued and
accounted for on our balance sheet with changes in fair value recognized during
the period of change as a separate component of other income/expense. Fair
values for exchange-traded securities and derivatives are based on quoted market
prices. The pricing model we use for determining fair value of our derivatives
is the Black-Scholes Pricing Model. Valuations derived from this model are
subject to ongoing internal and external verification and review. The model uses
market-sourced inputs such as interest rates and stock price volatilities.
Selection of these inputs involves management's judgment and may impact net
income.




Income
Taxes




Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. At
March 31, 2008, the Company had a full valuation allowance against its deferred
tax assets.





6







Estimated
Fair Value of Financial Instruments




The
Company's financial instruments include cash, accounts payable, long term debt,
line of credit, convertible debt and due to related parties. Management believes
the estimated fair value of cash and accounts payable at March 31, 2008
approximate their carrying value as reflected in the balance sheets due to the
short-term nature of these instruments. Fair value of due to related parties
cannot be determined due to lack of similar instruments available to the
Company.




Use of Estimates




The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles 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 revenue and expenses during the reporting period. Actual
results could differ from these estimates.




Net
Income (Loss) per Common Share




In
accordance with SFAS No. 128, "Earnings Per Share," Basic loss per share is
computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period. Diluted earnings per share is computed by
dividing net loss adjusted for income or loss that would result from the assumed
conversion of potential common shares from contracts that may be settled in
stock or cash by the weighted average number of shares of common stock, common
stock equivalents and potentially dilutive securities outstanding during each
period. The Company had 176,236,000 and 1,636,000 warrants outstanding at March
31, 2008 and 2007, respectively. The inclusion of the warrants and potential
common shares to be issued in connection with convertible debt have an
anti-dilutive effect on diluted loss per share because under the treasury stock
method the average market price of the Company's common stock was less than the
exercise prices of the warrants, and therefore they are not included in the
calculation.




Recent
Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements.
 SFAS No. 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.







In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities-an amendment of FASB Statement No. 133” (SFAS 161). SFAS
161 requires enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. SFAS
161 is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged.
The adoption of SFAS 161 is not expected to have a material impact on our
financial position, results of operations or cash flows.







NOTE 4 -SEGMENT INFORMATION





The
Company has two reportable segments in 2008: retail sales and investment
portfolio management.





Three
      Months Ended March 31, 2008Retail
            
            
            Investing
            
            TotalRevenueMerchandise
      sales and third party income
            
            $
            3,136,212
            
            
            $
            -
            
            
            $
            3,136,212Realized
      and unrealized gain on securities
            
            
            -
            
            
            
            52,932
            
            
            
            52,932Total
      revenue
            
            
            3,136,212
            
            
            
            52,932
            
            
            
            3,189,144Cost
      and expensesCost
      of revenue
            
            
            2,397,841
            
            
            
            -
            
            
            
            2,397,841Selling
      and administrative
            
            
            2,282,462
            
            
            
            -
            
            
            
            2,282,462Share
      based compensation
            
            
            -
            
            
            
            -
            
            
            
            -Interest
      expense
            
            
            497,919
            
            
            
            -
            
            
            
            497,919Unrealized
      loss on derivative instruments
            
            
            932,069
            
            
            
            -
            
            
            
            932,069Other
      expense
            
            
            9,209
            
            
            
            -
            
            
            
            9,209Total
      costs and expenses
            
            
            6,119,500
            
            
            
            -
            
            
            
            6,119,500Income
      (loss) from continuing operations
            
            $
            (2,983,288
            )
            
            $
            52,932
            
            
            $
            (2,930,356
            )Total
      assets
            
            $
            19,033,566
            
            
            $
            210,787
            
            
            $
            19,244,353Capital
      expenditures
            
            $
            42,879
            
            
            $
            -
            
            
            $
            42,879




7




NOTE
5 - STOCKHOLDERS' EQUITY




The
Company has 2,505,000,000 shares of capital stock authorized, consisting of
2,500,000,000 shares of Common Stock, par value $0.0001, 100,000 shares of
Series A Preferred Stock, par value $0.0001 per share, 100,000 shares of Series
B Preferred Stock, 1,600,000 shares of Series C Preferred Stock, 100,000 Shares
of Series E Preferred Stock, and 3,100,000 shares of undesignated Preferred
Stock, $0.0001 par value. During the quarter ended March 31, 2008 the Company
issued 139,231,091 shares of stock for the conversion of debt.




WARRANTS




A summary
of the status of the Company’s outstanding stock warrants as of March 31, 2008
and 2007 is as follows:




WeightedAverageExerciseShares
            
            
            PriceOutstanding
      at December 31, 2006
            
            
            -
            
            
            $
            -Granted
            
            
            1,636,000
            
            
            
            1.32Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Outstanding
      at March 31, 2007
            
            
            1,636,000
            
            
            $
            1.32Exercisable
      at March 31, 2007
            
            
            1,636,000
            
            
            $
            1.32WeightedAverageExerciseShares
            
            
            PriceOutstanding
      at December 31, 2007
            
            
            41,636,000
            
            
            
            0.06Granted
            
            
            134,600,000
            
            
            
            0.01Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Outstanding
      at March 31, 2008
            
            
            176,236,000
            
            
            $
            0.02Exercisable
      at March 31, 2008
            
            
            176,236,000
            
            
            $
            0.02




STOCK
BASED COMPENSATION





During
the three months ended March 31, 2007, the Company issued 41,915,022 shares of
common stock to officers and employees in exchange for services. The shares were
valued at $1,810,654 based on the value of the shares on the dates of the
grants.




NOTE
6 - LINE OF CREDIT




On March
4, 2008, Seaway Valley Capital Corporation and its wholly owned subsidiaries,
WiseBuys Stores, Inc. and Patrick Hackett Hardware Company (collectively
"Seaway" or the "Company"), consummated a five million dollar ($5,000,000)
credit and security agreement with WellsFargo Bank, National
Association, acting through its Wells Fargo Business Credit operating division
(the "Line of Credit"). The funds available under Line of Credit are based on
the Company's current inventory with adjustments based on items such as accounts
payable. The term of the Line of Credit is three years. The interest rate on the
Line of Credit is equal to the sum of the Wells Fargo prime rate plus one and
one-quarter percent (1.25%), which interest rate shall change when and as the
Wells Fargo prime rate changes. These funds will be used for general working
capital at the Company. Under the terms of the agreement, the subsidiaries are
required to maintain certain financial covenants including tangible net worth,
net income and net cash flow amounts. At March 31, 2008 these covenants were not
met. The lender has waived compliance with these covenants as of March 31,
2008.





8




NOTE 7
- CONVERTIBLE DEBENTURES




Following
is a summary of convertible debentures as of March 31, 2008:




Convertible
      Debentures due on March 23, 2009, provides for interest in the amount of
      10% per annum and are convertible at the lesser of (a) $0.015 or (b) 85%
      of the lowest closing bid price of Seaway common stock during the 10
      trading days immediately preceding the conversion date.
            
            $
            150,000Convertible
      debentures due on December 12, 2010 provide for interest at 7% per annum
      and are convertible at the lesser of (a) $0.10 per share or (b) 85% of the
      average 3 lowest Volume Weighted Average Prices ("VWAP") during the 20
      trading days prior to the holder's election to convert. If the holder
      elects to convert a portion of the debenture and the VWAP is below $0.005,
      the Company shall have the right to prepay that portion of the debenture
      that the holder elected to convert, plus any accrued interest at 150% of
      such amount.
            
            
            1,500,000Convertible
      debenture due on September 18, 2012 provide for interest at 8% per annum
      and is convertible at the lesser of (a) $0.024 per share or (b) 90% of the
      closing market price for the day prior to the date of the holder's
      election to convert.
            
            
            470,000Convertible
      debentures due on demand provide for interest at 12% per annum and are
      convertible at the lesser of (a) $0.02 per share or (b) 90% of the closing
      market price for the day prior to the date of the holders' election to
      convert.
            
            
            944,775Convertible
      debenture due on December 10, 2011 provide for interest at 12% per annum
      and is convertible at the lesser of (a) $0.01 per share or (b) 75% of the
      closing market price for the day prior to the date of the holder's
      election to convert.
            
            
            1,525,000Convertible
      debentures due on November 30, 2010 provide for interest at 10% per annum
      and are convertible at the lesser of (a) $0.011 per share or (b) 75% of
      the lowest Volume Weighted Average Prices ("VWAP") during the 5 trading
      days immediately preceding the holder's election to
    convert.
            
            
            550,000Convertible
      debenture due on March 2, 2010 provide for interest at 12% per annum and
      is convertible at the lesser of (a) $0.01 per share or (b) 75% of the
      average lowest Volume Weighted Average Price ("VWAP") during the 5 trading
      days prior to the holder's election to convert.
            
            
            50,589Convertible debenture due on February 28,
      2010 provide for interest at 12% per annum and are convertible at the
      lesser of (a) $0.01 per share or (b) 75% of the lowest Volume Weighted
      Average Prices ("VWAP") during the 5 trading days immediately preceding
      the holder's election to convert.
            
            
            2,249,0737,439,437Less
      note discounts
            
            
            (3,791,928
            )Total
      convertible debentures, net of discounts
            
            $
            3,647,509Convertible
      debentures, current portion
            
            $
            3,343,848Less
      note discounts
            
            
            (1,814,226
            )Total
      current portion of convertible debentures
            
            
            1,529,622Convertible
      debentures, net of current portion
            
            
            4,095,589Less
      note discounts
            
            
            (1,977,702
            )Total
      convertible debentures, net of current maturities
            
            
            2,117,887Total
      convertible debentures, net of discounts
            
            $
            3,647,509




On January 30, 2008, the
Company entered into an amended financing agreement with JMJ Financial. Under
the terms of the agreement, in addition to the debenture issued in the amount of
$325,000, the Company agreed to issue a $1,200,000 convertible debenture to JMJ
Financial with an interest rate of 10%. The debenture is due December 10, 2011.
The debt is convertible at the lesser of a) $.01 or b) 75% of the lowest trade
price in the 20 trading days previous to the conversion. Concurrent with the
debt, JMJ Financial issued a note receivable to the Company in the amount of
$1,000,000. The note provides for interest at 12% and is due December 10,
2012.




The
Company determined that the conversion feature of the amended convertible
debenture represent an embedded derivative since the debentures is convertible
into a variable number of shares upon conversion. Accordingly, the assumed
convertible debentures are not considered to be conventional debt under EITF
00-19 and the embedded conversion feature must be bifurcated from the debt host
and accounted for as a derivative liability. The embedded derivative feature
created by the variable conversion meets the criteria of SFAS 133 and EITF
00-19, and should be accounted for as a separate derivative. At March 31, 2008
the fair value of the conversion derivative liability created by the assumed
debentures calculated using the Black-Scholes model was $516,129. For the three
months ended March 31, 2008 the unrealized loss on the derivative instrument
created by this debenture was $156,578.





9







On March 3, 2008, the Company entered into a $50,589 Convertible
Debenture due March 2, 2010 and bears interest at the rate of 12% per annum. The
note is convertible at the lesser of $0.01 per share or 75% of the average
lowest Volume Weighted Average Price ("VWAP") during the 5 trading days prior to
the holder's election to convert.




The
Company determined that the conversion feature of the convertible debenture
represents an embedded derivative since the debenture is convertible into a
variable number of shares upon conversion. Accordingly, the assumed convertible
debentures are not considered to be conventional debt under EITF 00-19 and the
embedded conversion feature must be bifurcated from the debt host and accounted
for as a derivative liability. The embedded derivative feature created by the
variable conversion meets the criteria of SFAS 133 and EITF 00-19, and should be
accounted for as a separate derivative. At March 31, 2008 the fair value of the
conversion derivative liability created by the assumed debentures calculated
using the Black-Scholes model was $24,528. For the three months ended March 31,
2008 the unrealized gain on the derivative instrument created by this debenture
was $150.




On March
4, 2008, Community Bank, N.A. (the "Bank") entered into an agreement (the
"Assignment Agreement") with YA Global Investments, LP, a Cayman Island exempt
limited partnership ("YA Global") whereby the Bank assigned and YA Global
assumed the following debt instruments previously issued by Seaway Valley
Capital Corporation:




(A)
            The
      Mortgage, dated February 14, 2006, between Hackett and the Assignor in the
      amount of Three Hundred and Eighty Thousand Dollars ($380,000) (the
      "Ogdensburg Mortgage");




(B)
            The
      Mortgage, dated November 6, 2001, between Hackett and the Assignor in the
      amount of One Hundred Fifty thousand Dollars ($150,000) (the "Canton
      Mortgage");




(C)
            The
      Commercial Promissory Note (No. C-06-03-008249), dated April 5, 2006,
      between Hackett and the Assignor in the amount of Two Hundred Fifty
      Thousand Dollars ($250,000) (the "April
Note");




(D)
            The
      Commercial Promissory Note (No. C-06-09-017697), dated September 1, 2006,
      between Hackett and the Assignor in the amount of One Million Dollars
      ($1,000,000) (the "September Note");
and




(E)
            The
      Commercial Line of Credit Agreement and Note (No. C-06-03-008243), dated
      April 5, 2006, between Hackett and the Assignor in the amount of Nine
      Hundred Fifty Thousand Dollars ($950,000) (the "April Line of Credit" and
      together with the Ogdensburg Mortgage, the Canton Mortgage, the April Note
      and the September Note, as herein after jointly referred to as the "Debt
      Instruments").




The above
Debt Instruments represented obligations that became obligations of Seaway
Valley Capital Corporation on November 7, 2007 as a result of the Company's
completion of the following acquisition transactions as previously
reported:




First,
and on October 23, 2007, the Company acquired all of the capital stock of
WiseBuys Stores, Inc.. As a result, WiseBuys became a wholly-owned subsidiary of
the Company and the Company assumed all liabilities, debts, and obligations of
WiseBuys (the "WiseBuys Acquisition") through the Company's wholly-owned
subsidiary, Seaway Valley Acquisition Corp.




Second
and on November 7, 2007, WiseBuys purchased all of the outstanding capital stock
of Patrick Hackett Hardware Company, a New York corporation in exchange for the
Company's payment of a total of cash and promissory notes (the "Hackett's
Acquisition"). As a result Hackett's became a wholly owned subsidiary of
WiseBuys and WiseBuys and the Company agreed to assume and did assume the
responsibility for the payment of all liabilities, debts, and other obligations
of Hackett's, including, but not limited to, the Debt Instruments on November 7,
2007.




In
completing the Assignment Agreement, the Company entered into an exchange
agreement (the "Exchange Agreement") and agreed to exchange $2,249,073 in
Community Bank debt for convertible debentures of the same dollar value (the
"Exchange Debentures"). The Exchange Debentures were issued to YA Global and
carry an interest rate of 12% and are convertible into shares of the Company at
the lesser of $0.01 per share or seventy five percent (75%) of the lowest volume
weighted average price during the five (5) trading days immediately preceding
the conversion date. As part of this Exchange Agreement, the Company amended
three outstanding YA Global convertible debentures to, among other things, match
the Exchange Debenture conversion feature. Additionally, the Company issued a
cashless-only warrant to YA Global that can be exercised into and up to
134,600,000 shares of the Company's common stock at $0.01 per share. If
exercised in part or whole, the Company would receive no consideration for the
issuance of any common shares related to this warrant.




The
Company determined that the conversion feature of the assumed convertible
debentures represent an embedded derivative since the debentures is convertible
into a variable number of shares upon conversion. Accordingly, the assumed
convertible debentures are not considered to be conventional debt under EITF
00-19 and the embedded conversion feature must be bifurcated from the debt host
and accounted for as a derivative liability. The embedded derivative feature
created by the variable conversion meets the criteria of SFAS 133 and EITF
00-19, and should be accounted for as a separate derivative. At March 31, 2007
the fair value of the conversion derivative liability created by the assumed
debentures calculated using the Black-Scholes model was $1,090,460. For the year
ended December 31, 2007 the unrealized gain on the derivative instrument created
by this debenture was $6,649.




The
following assumptions were applied to all convertible debt:





Market
      price
            $0.006Exercise
      prices
            $0.004-$0.006Expected
      Term (Days)
            1-20Volatility
            21%-90%Risk-free
      interest rate
            1.38%-1.62%




During
the year ended December 31, 2007, holders of the aforementioned securities
converted amounts totaling $158,322 into 139,231,091 shares of common
stock.




10




NOTE
8 – FAIR VALUE MEASUREMENTS




At March
31, 2008 the fair value measurements used to determine the fair value of
derivative liabilities and trading securities are as follows:




Fair
      Value Measurements at Reporting Date UsingQuoted
      Prices in
              Active
      Markets
              (Level
      1)
            
            
            Significant
      Other
              Observable
      Inputs
              (Level
      2)
            
            
            Significant
              Unobservable
      Inputs
              (Level
      3)Derivative
      Liabilities
            
            $
            -
            
            
            $
            2,751,249
            
            
            $
            -Trading
      Securities
            
            $
            210,787
            
            
            $
            -
            
            
            $
            -




NOTE
9 - SUBSEQUENT EVENTS




On April
1, 2008, the company advanced an additional $100,000 on the original $100,000
non interest bearing note, secured by 2,500,000 shares of common stock and 1,000
shares of preferred stock in North Country Hospitality, Inc., representing a 22%
equity interest, with an option to purchase the aforementioned shares, due on
December 31, 2007 and subsequently extended.




On April
12, 2008, Thomas Scozzafava exchanged 100,000 shares of Series B Preferred Stock
of the Company for 100,000 shares of Series E Preferred Stock.  As a result
of the exchange, there were no Series B Preferred Shares issued or
outstanding.




On April
17, 2008, Seaway Valley Capital Corporation executed an agreement to acquire
100% of the assets and assume 100% of the liabilities of North Country
Hospitality, Inc. for the issuance of $5.25 million in Series D Preferred
Stock.  North Country was formed in 2005 by Christopher Swartz to
develop or acquire and operate lodging, restaurant, and recreational venues in
and around northern New York, which is commonly referred to as the “north
country” region of New York.  In addition, North Country Hospitality
seeks to acquire or develop strategic consumer products that complement its core
hospitality businesses and that can be positioned for growth outside the
region.  The company’s hospitality assets are positioned to benefit
from regional tourism, which is one of the fastest growing industries in the
area.  And North Country’s premium consumer products are well
established locally but can be further positioned for growth outside the
region.




North
Country’s (primary businesses include:




Ø
            Sackets Harbor Brewing
      Company develops, produces, and markets micro brewed beers such as
      the award winning “1812 Amber Ale” and “Railroad Red Ale” as well as
      “Thousand Island Pale Ale”, “1812 Amber Ale Light” and “Harbor Wheat”
      specialty beers.  Its “1812 Amber Ale” is the company’s flagship
      brand and was the winner of a Silver Award at the 1998 World Beer
      Championship and has been aggressively marketed to command a significant
      retail presence in the regional market place.  Management
      estimates 1812 Ale has an approximate 15% category market share within its
      primary distribution area and distributes keg and bottled beer to over 300
      locations in northern New York.   The company has also
      developed complementary products such Sackets Harbor Coffee and Sackets
      Harbor Brewing Co. Root Beer.




Ø
            Sackets Harbor Brew Pub
      is an operating “Brew Pub" that produces its own specialty beer on site
      while also offering fine dining.  The Brew Pub offers six of its
      own brews on tap including each of its regionally sold beers such as 1812
      Ale, Railroad Red, and Thousand Island Pale Ale as well as ever changing
      seasonal offerings.




Ø
            Goodfello’s Brick Oven Pizza
      and Wine Bar is featured in charming interior of brick and wood and
      specializes in excellent-yet-affordable Italian food. The focal point of
      the restaurant is its large brick oven for cooking pizza, appetizers and
      special pasta entrees along a comfortable bar that offers a wide variety
      of wine and beer including Sackets Harbor Brewing Company
      selections.




Ø
            Sackets Cantinaoffers a
      traditional Mexican menu featuring the usual favorites as well as many
      excellent Mexican-inspired creations.  The restaurant is set in
      a completely remodeled historic building expressing the bright colors and
      ambiance of Old Mexico and enhanced by a copper covered bar that offers
      varieties of Mexican beers and tequilas.  The Cantina’s
      signature dish is the “Molcajete” which is seldom seen in American Mexican
      restaurants.




Ø
            Jreck Subs Franchises
      (www.jrecksubs.com) North Country now owns and operates five Jreck Subs
      franchise locations in northern and central New York including Watertown,
      Clayton, Cape Vincent, Alexandra Bay, and Liverpool.  The Jreck
      Subs Company was started in 1967 by five local entrepreneurs, and since
      then, Jreck Subs has grown to over forty-seven locations in northern and
      central New York.  The Jreck Subs concept is quality foods at
      moderate prices.  Jreck Subs have a variety of hot and cold
      sandwich choices, homemade style soups, and a children’s
    menu.




Ø
            Alteri Bakery
      (www.alteribakery.com) has serviced the North Country region with quality
      baked goods since 1971 and is still operated by the founders’ son,
      Mark.  Alteri is now located in a state of the art baking
      facility in the heart of Watertown’s business district, and is one of the
      last traditional Italian bakeries in the area.  Alteri brings
      four generations of baking experience and over 80 years of serving
      northern N.Y. with the finest "true" Italian breads and specialty pastry
      items, such as cakes, cookies, muffins, bagels, and specialty gift
      baskets.  Alteri products can be found at local restaurants,
      grocery stores, schools, and its own store.  In addition, Alteri
      recently assumed the production of sub rolls for the entire Jreck Subs
      franchise chain of 47 locations, which alone includes approximately two
      million five hundred thousand rolls baked and shipped
      annually.




Ø
            Various
      Real Estate Assets are under development for future restaurants or retail
      outlets.




11




As part
of the North Country Hospitality, Inc. transaction, Christopher Swartz was named
Chief Operating Officer of and elected to the Board of Directors of the
Company.




On May
15, 2008 the Company issued a $50,000 convertible debenture to an individual for
financing provided.  The debenture, due May 14, 2013, is convertible
into common stock equal to the lesser of: (a) $0.004 per share; (b) the amount
of this note to be converted divided by 75% of the closing market price of the
Maker’s common stock for the day prior to the date of the exercise of such
conversion right; or (c) the lowest per share price of any common stock issued
by Maker any time subsequent from the May 15, 2008.




On June
1, 2008 the Company closed on its acquisition of Harbor Acquisitions, LLC, the
entity containing substantially all of the businesses and assets of North
Country Hospitality, Inc. through the acquisition of Harbor Acquisitions,
LLC.  Harbor Acquisitions, LLC was renamed North Country Hospitality,
Inc. and is a wholly owned subsidiary of the Company.  The former
North Country Hospitality, Inc. was renamed North Country Capital Corporation
(“NCCC”) and is owned and operates its business independently from the
Company.




On June
1, 2008 and as part of the North Country Hospitality, Inc. transaction, the
Company agreed to assume and amend approximately $205,668 of North Country’s
vendor payables owed to Renzi Bros., Inc.  The amended security
modified the debts so that the Creditor, at its option, is entitled to converts
its debt into common stock with a conversion rate equal to sixty-five percent
(65%) of the average of the closing prices.




Between
June 20th and July 31, 2008, Golden Gate repaid approximately $175,000 of its
$1.1 million original face value Secured Promissory Note owed to the
Company.




On July
11, 2008 the Company issued a $100,000 convertible debenture to two individuals
for financing provided.  The debenture, due July 10, 2013, is
convertible into common stock equal to the lesser of: (a) $0.0008 per share; (b)
the amount of this note to be converted divided by 75% of the closing market
price of the Maker’s common stock for the day prior to the date of the exercise
of such conversion right; or (c) the lowest per share price of any common stock
issued by Maker any time subsequent from the July 11, 2008.




On July
25, 2008, the Company filed a Preliminary 14C Information Statement notifying
shareholders that the holders of shares representing a majority of the voting
power of the Company had given written consent to a resolution adopted by the
Board of Directors of SVCC to amend the Certificate of Incorporation so as to:
(1) effect a reverse split of the company’s common stock in a ratio of
one-for-five; and (2) increase the authorized common stock to 10 billion
shares.  It is anticipated that the Information Statement will be
mailed in August or September 2008 to shareholders of record with a subsequent
effective date for the amendment of the Certificate of Incorporation filing with
the Delaware Secretary of State.




On August
1, 2008 the Company sold to NCCC certain of the assets the Company acquired on
June 1, 2008.  Specifically, NCCC acquired all of the recently
purchased Jreck restaurants, the Battlefield Driving Range, and certain real
property associated with these operations for the assumption of approximately
$2.1 million in associated debt.




Subsequent
to the three months ended March 31, 2008, holders of certain convertible
debentures converted amounts totaling $968,337 into 983,189,169 shares of common
stock.




Subsequent
to the three months ended March 31, 2008 the Company issued shares totaling
139,500,000 valued at $494,500 for services.




Subsequent
to the original issuance of the financial statements for the three months ended
March 31, 2008, holders of Preferred Series C converted shares totaling 9,000
into 51,696,072 shares of common stock.




12
 
  NOTE
10 - RESTATEMENT
  The
accompanying financial statements have been restated to more accurately reflect
the acquisition of WiseBuys Stores Inc. based on a review performed by the SEC.
Upon further review, the Company determined that the acquisition of WiseBuys
Store Inc. was not a merger under common control as previously reported since
the CEO did not hold a majority interest in the Company at the time of
acquisition. Accordingly, the Company has removed the historical information of
Wisebuys Stores Inc. and recognized the excess purchase price of the investment.
A summary of the effect of this change is as follows:


SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETAS
      OF MARCH 31, 2008 (UNAUDITED) AND DECEMBER 31, 2007As
      Restated
            
            
            As
      Previously Reported
            
            
            ChangeASSETS
            
            March
      31, 2008
            
            
            December
      31, 2007
            
            
            March
      31, 2008
            
            
            December
      31, 2007
            
            
            March
      31, 2008
            
            
            December
      31, 2007Current
      assets:Cash
            
            $
            988,165
            
            
            $
            1,116,003
            
            
            $
            988,165
            
            
            $
            1,116,003
            
            
            $
            -
            
            
            
            -Accounts
      receivable
            
            
            212,583
            
            
            
            323,357
            
            
            
            212,583
            
            
            
            323,357
            
            
            
            -
            
            
            
            -Inventories
            
            
            5,540,752
            
            
            
            6,194,051
            
            
            
            5,540,752
            
            
            
            6,194,051
            
            
            
            -
            
            
            
            -Notes
      receivable
            
            
            2,200,000
            
            
            
            1,200,000
            
            
            
            2,200,000
            
            
            
            1,200,000
            
            
            
            -
            
            
            
            -Marketable
      securities, available for sale
            
            
            210,787
            
            
            
            158,353
            
            
            
            210,787
            
            
            
            158,353
            
            
            
            -
            
            
            
            -Prepaid
      expenses and other assets
            
            
            56,765
            
            
            
            48,990
            
            
            
            56,765
            
            
            
            48,990
            
            
            
            -
            
            
            
            -Refundable
      income taxes
            
            
            226,026
            
            
            
            320,032
            
            
            
            226,026
            
            
            
            320,032
            
            
            
            -
            
            
            
            -Total
      current assets
            
            
            9,435,078
            
            
            
            9,360,786
            
            
            
            9,435,078
            
            
            
            9,360,786
            
            
            
            -
            
            
            
            -Property
      and equipment, net
            
            
            3,721,462
            
            
            
            3,787,485
            
            
            
            3,721,462
            
            
            
            3,787,485
            
            
            
            -
            
            
            
            -Other
      Assets:Deferred
      financing fees
            
            
            556,805
            
            
            
            82,301
            
            
            
            556,805
            
            
            
            82,301
            
            
            
            -
            
            
            
            -Other
      Assets
            
            
            399,237
            
            
            
            387,226
            
            
            
            399,237
            
            
            
            387,226
            
            
            
            -
            
            
            
            -Excess
      purchase price
            
            
            8,988,102
            
            
            
            8,988,102
            
            
            
            5,099,471
            
            
            
            5,099,471
            
            
            
            3,888,631
            
            
            
            3,888,631Security
      deposits
            
            
            32,300
            
            
            
            32,300
            
            
            
            32,300
            
            
            
            32,300
            
            
            
            -
            
            
            
            -Total
      other assets
            
            
            9,976,444
            
            
            
            9,489,929
            
            
            
            6,087,813
            
            
            
            5,601,298
            
            
            
            3,888,631
            
            
            
            3,888,631TOTAL
      ASSETS
            
            
            23,132,984
            
            
            
            22,638,200
            
            
            
            19,244,353
            
            
            
            18,749,569
            
            
            
            3,888,631
            
            
            
            3,888,631

















13




SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETAS
      OF MARCH 31, 2008 (UNAUDITED) AND DECEMBER 31, 2007As
      Restated
            
            
            As
      Previously Reported
            
            
            ChangeLIABILITIES
      AND STOCKHOLDER'S EQUITY
            
            March
      31, 2008
            
            
            December
      31, 2007
            
            
            March
      31, 2008
            
            
            December
      31, 2007
            
            
            March
      31, 2008
            
            
            December
      31, 2007Current
      liabilities:Line
      of credit
            
            $
            2,442,169
            
            
            $
            925,000
            
            
            $
            2,442,169
            
            
            $
            925,000
            
            
            $
            -
            
            
            $
            -Accounts
      payable
            
            
            1,675,955
            
            
            
            3,133,709
            
            
            
            1,675,955
            
            
            
            3,133,709
            
            
            
            -
            
            
            
            -Accrued
      expenses
            
            
            830,424
            
            
            
            719,099
            
            
            
            830,424
            
            
            
            719,099
            
            
            
            -
            
            
            
            -Current
      portion of long term debt
            
            
            3,166,303
            
            
            
            3,075,869
            
            
            
            3,166,303
            
            
            
            3,075,869
            
            
            
            -
            
            
            
            -Convertible
      debentures
            
            
            1,529,622
            
            
            
            946,328
            
            
            
            1,529,622
            
            
            
            946,328
            
            
            
            -
            
            
            
            -Derivative
      liability - convertible debentures
            
            
            3,291,906
            
            
            
            878,499
            
            
            
            3,291,906
            
            
            
            878,499
            
            
            
            -
            
            
            
            -Total
      current liabilities
            
            
            12,936,379
            
            
            
            9,678,504
            
            
            
            12,936,379
            
            
            
            9,678,504
            
            
            
            -
            
            
            
            -Long
      term debt, net of current
            
            
            3,141,429
            
            
            
            4,800,874
            
            
            
            3,141,429
            
            
            
            4,800,874
            
            
            
            -
            
            
            
            -Convertible
      debentures payable, net - long term
            
            
            2,117,887
            
            
            
            1,177,669
            
            
            
            2,117,887
            
            
            
            1,177,669
            
            
            
            -
            
            
            
            -Due
      to related parties
            
            
            12,500
            
            
            
            12,500
            
            
            
            12,500
            
            
            
            12,500
            
            
            
            -
            
            
            
            -Total
      liabilities
            
            
            18,208,195
            
            
            
            15,669,547
            
            
            
            18,208,195
            
            
            
            15,669,547
            
            
            
            -
            
            
            
            -Commitments
      and contingencies
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -STOCKHOLDERS'
      EQUITYSeries
      A voting preferred stock, $.0001 par value; 100,000shares
      authorized; no shares issued and outstanding
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Series
      B voting preferred stock, $.0001 par value; 100,000shares
      authorized; 81,250 shares issued and outstanding
            
            
            10
            
            
            
            10
            
            
            
            10
            
            
            
            10
            
            
            
            -
            
            
            
            -Series
      C voting preferred stock, $.0001 par value; 4,800,000shares
      authorized; 1,458,236 shares issued and outstanding
            
            
            146
            
            
            
            146
            
            
            
            146
            
            
            
            146
            
            
            
            -
            
            
            
            -Common
      stock, $0.0001 par value, 2,500,000,000 authorized;891,391,917
      shares issued and outstanding
            
            
            103,062
            
            
            
            89,139
            
            
            
            103,062
            
            
            
            89,139
            
            
            
            -
            
            
            
            -Additional
      paid-in capital
            
            
            12,759,856
            
            
            
            11,887,287
            
            
            
            11,257,376
            
            
            
            10,384,807
            
            
            
            1,502,480
            
            
            
            1,502,480Accumulated
      deficit
            
            
            (7,938,285
            )
            
            
            (5,007,929
            )
            
            
            (10,324,436
            )
            
            
            (7,394,080
            )
            
            
            2,386,151
            
            
            
            2,386,151Total
      stockholders' deficiency
            
            
            4,924,789
            
            
            
            6,968,653
            
            
            
            1,036,158
            
            
            
            3,080,022
            
            
            
            3,888,631
            
            
            
            3,888,631TOTAL
      LIABILITIES AND STOCKHOLDERS'
              DEFICIENCY
            
            $
            23,132,984
            
            
            $
            22,638,200
            
            
            
            19,244,353
            
            
            $
            18,749,569
            
            
            
            3,888,631
            
            
            
            3,888,631



















14








SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF INCOMEFOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)As
      Restated
            
            
            As
      Previously Reported
            
            
            Change2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue
            
            $
            3,136,212
            
            
            $
            -
            
            
            $
            3,136,212
            
            
            $
            994,736
            
            
            $
            -
            
            
            $
            (994,736
            )Cost
      of revenue
            
            
            2,397,841
            
            
            
            -
            
            
            
            2,397,841
            
            
            
            620,744
            
            
            
            -
            
            
            
            (620,744
            )Gross
      profit
            
            
            738,371
            
            
            
            -
            
            
            
            738,371
            
            
            
            373,992
            
            
            
            -
            
            
            
            (373,992
            )Gain
      on sale of securities
            
            
            52,932
            
            
            
            -
            
            
            
            52,932
            
            
            
            449,661
            
            
            
            -
            
            
            
            (449,661
            )Operating
      expenses:Selling,
      general and administrative expenses
            
            
            2,282,462
            
            
            
            1,810,654
            
            
            
            2,282,462
            
            
            
            2,783,479
            
            
            
            -
            
            
            
            (972,825
            )Total
      operating expenses
            
            
            2,282,462
            
            
            
            1,810,654
            
            
            
            2,282,462
            
            
            
            2,783,479
            
            
            
            -
            
            
            
            (972,825
            )Operating
      loss
            
            
            (1,491,159
            )
            
            
            (1,810,654
            )
            
            
            (1,491,159
            )
            
            
            (1,959,826
            )
            
            
            -
            
            
            
            149,172Other
      income (expense):Unrealized
      gain on derivative instruments
            
            
            (932,069
            )
            
            
            (983,455
            )
            
            
            (932,069
            )
            
            
            (983,455
            )
            
            
            -
            
            
            
            -Interest
      expense
            
            
            (497,919
            )
            
            
            -
            
            
            
            (497,919
            )
            
            
            (24,143
            )
            
            
            -
            
            
            
            24,143Interest
      income
            
            
            37,392
            
            
            
            -
            
            
            
            37,392
            
            
            
            5,953
            
            
            
            -
            
            
            
            (5,953
            )Other
      income (expense)
            
            
            (46,601
            )
            
            
            -
            
            
            
            (46,601
            )
            
            
            3,578
            
            
            
            -
            
            
            
            (3,578
            )Total
      other income (expense)
            
            
            (1,439,197
            )
            
            
            (983,455
            )
            
            
            (1,439,197
            )
            
            
            (998,067
            )
            
            
            -
            
            
            
            14,612Loss
      from continuing operations
            
            
            (2,930,356
            )
            
            
            (2,794,109
            )
            
            
            (2,930,356
            )
            
            
            (2,957,893
            )
            
            
            -
            
            
            
            163,784Discontinued
      operationsLoss
      on disposal of discontinued operations
            
            
            -
            
            
            
            (95,956
            )
            
            
            -
            
            
            
            (95,956
            )
            
            
            -
            
            
            
            -Loss
      from discontinued operations
            
            
            -
            
            
            
            (1,932,194
            )
            
            
            -
            
            
            
            (1,932,194
            )
            
            
            -
            
            
            
            -Total
      discontinued operations
            
            
            -
            
            
            
            (2,028,150
            )
            
            
            -
            
            
            
            (2,028,150
            )
            
            
            -
            
            
            
            -Loss
      before provision for income taxes
            
            
            (2,930,356
            )
            
            
            (4,822,259
            )
            
            
            (2,930,356
            )
            
            
            (4,986,043
            )
            
            
            -
            
            
            
            163,784Provision
      for (benefit from) income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            192,571
            
            
            
            -
            
            
            
            (192,571
            )Net
      loss
            
            $
            (2,930,356
            )
            
            $
            (4,822,259
            )
            
            $
            (2,930,356
            )
            
            $
            (5,178,614
            )
            
            $
            -
            
            
            $
            356,355Basic
      and diluted income per share-continuing
            
            $
            0.00
            
            
            $
            (0.04
            )
            
            $
            0.00
            
            
            $
            (0.04
            )
            
            $
            0.00
            
            
            $
            0.00Basic
      and diluted income per share-discontinued
            
            
            0.00
            
            
            
            (0.02
            )
            
            
            0.00
            
            
            
            (0.02
            )
            
            
            0.00
            
            
            
            0.00Basic
      and diluted income per share
            
            $
            0.00
            
            
            $
            (0.06
            )
            
            $
            0.00
            
            
            $
            (0.07
            )
            
            $
            0.00
            
            
            $
            0.00Weighted
      average of shares of common stockoutstanding, basic
            
            
            951,098,332
            
            
            
            75,211,131
            
            
            
            951,098,332
            
            
            
            75,211,131
            
            
            
            -
            
            
            
            -



















15








SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)As
      Restated
            
            
            As
      Previously Reported
            
            
            Change2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007CASH
      FLOWS FROM OPERATING
              ACTIVITIES:Continuing
      OperationsNet
      income loss from continuing operations
            
            $
            (2,930,356
            )
            
            $
            (2,794,109
            )
            
            $
            (2,930,356
            )
            
            $
            (3,150,484
            )
            
            $
            -
            
            
            $
            356,375Adjustments
      to reconcile net loss to net cash providedby
      continuing operating activities:Depreciation
      and amortization
            
            
            108,902
            
            
            
            -
            
            
            
            108,902
            
            
            
            29,504
            
            
            
            -
            
            
            
            (29,504
            )Gain
      on marketable securities
            
            
            (52,434
            )
            
            
            -
            
            
            
            (52,434
            )
            
            
            (449,661
            )
            
            
            -
            
            
            
            449,661Unrealized
      gain on derivatives
            
            
            932,069
            
            
            
            983,455
            
            
            
            932,069
            
            
            
            983,455
            
            
            
            -
            
            
            
            -Amortization
      of deferred financing fees
            
            
            35,496
            
            
            
            -
            
            
            
            35,496
            
            
            
            -
            
            
            
            -
            
            
            
            -Stock
      based compensation
            
            
            -
            
            
            
            1,810,654
            
            
            
            -
            
            
            
            1,810,654
            
            
            
            -
            
            
            
            -Amortization
      of debt discount
            
            
            236,008
            
            
            
            -
            
            
            
            236,008
            
            
            
            90,498
            
            
            
            -
            
            
            
            (90,498
            )Change
      in assets and liabilities:Accounts
      receivable
            
            
            110,774
            
            
            
            -
            
            
            
            110,774
            
            
            
            (7,799
            )
            
            
            -
            
            
            
            7,799Inventory
            
            
            653,299
            
            
            
            -
            
            
            
            653,299
            
            
            
            235,380
            
            
            
            -
            
            
            
            (235,380
            )Prepaid
      expenses and other assets
            
            
            86,231
            
            
            
            -
            
            
            
            86,231
            
            
            
            (4,578
            )
            
            
            -
            
            
            
            4,578Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            193,593
            
            
            
            -
            
            
            
            (193,593
            )Other
      assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,336
            
            
            
            -
            
            
            
            (4,336
            )Security
      deposits
            
            
            (12,011
            )
            
            
            -
            
            
            
            (12,011
            )
            
            
            -
            
            
            
            -
            
            
            
            -Accounts
      payable
            
            
            (1,457,754
            )
            
            
            -
            
            
            
            (1,457,754
            )
            
            
            13,953
            
            
            
            -
            
            
            
            (13,953
            )Accrued
      expenses
            
            
            102,790
            
            
            
            -
            
            
            
            102,790
            
            
            
            (26,306
            )
            
            
            -
            
            
            
            26,306Cash
      Provided by (Used in) Continuing Operating Activities
            
            
            (2,186,986
            )
            
            
            -
            
            
            
            (2,186,986
            )
            
            
            (277,455
            )
            
            
            -
            
            
            
            277,455Discontinued
      operationsNet
      loss from discontinued operations
            
            
            -
            
            
            
            (2,028,130
            )
            
            
            -
            
            
            
            (2,028,130
            )
            
            
            -
            
            
            
            -Adjustments
      to reconcile net loss to net cashprovided
      by discontinued operating activitiesDepreciation
      and amortization
            
            
            -
            
            
            
            19,430
            
            
            
            -
            
            
            
            19,430
            
            
            
            -
            
            
            
            -Loss
      from discontinued operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Unrealized
      loss on derivative instruments
            
            
            -
            
            
            
            1,406,250
            
            
            
            -
            
            
            
            1,406,250
            
            
            
            -
            
            
            
            -Amortization
      of debt discount
            
            
            -
            
            
            
            130,710
            
            
            
            -
            
            
            
            130,710
            
            
            
            -
            
            
            
            -Change
      in assets and liabilitiesAccrued
      liabilities
            
            
            -
            
            
            
            42,452
            
            
            
            -
            
            
            
            42,452
            
            
            
            -
            
            
            
            -Cash
      Used in Discontinued Operating Activities
            
            
            -
            
            
            
            (429,288
            )
            
            
            -
            
            
            
            (429,288
            )
            
            
            -
            
            
            
            -Cash
      Provided by (Used in) Operating Activities
            
            
            (2,186,986
            )
            
            
            (429,288
            )
            
            
            (2,186,986
            )
            
            
            (706,743
            )
            
            
            -
            
            
            
            277,455



















16








SEAWAY
      VALLEY CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)As
      Restated
            
            
            As
      Previously Reported
            
            
            Change2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007CASH
      FLOWS FROM INVESTING
              ACTIVITIES:Purchase
      of marketable securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (841,245
            )
            
            
            -
            
            
            
            841,245Purchase
      of property and equipment
            
            
            (42,879
            )
            
            
            -
            
            
            
            (42,879
            )
            
            
            -
            
            
            
            -
            
            
            
            -Cash
      used in investing activities
            
            
            (42,879
            )
            
            
            -
            
            
            
            (42,879
            )
            
            
            (841,245
            )
            
            
            -
            
            
            
            841,245CASH
      FLOWS FROM FINANCING
              ACTIVITIES:Deferred
      financing fees
            
            
            (260,000
            )
            
            
            -
            
            
            
            (260,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -Borrowings
      on line of credit
            
            
            2,392,169
            
            
            
            -
            
            
            
            2,392,169
            
            
            
            -
            
            
            
            -
            
            
            
            -Repayments
      to related parties - discontinued
            
            
            -
            
            
            
            (512,013
            )
            
            
            -
            
            
            
            (661,190
            )
            
            
            -
            
            
            
            149,177Proceeds
      from issuance of preferred stock - subsidiary
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            321,175
            
            
            
            -
            
            
            
            (321,175
            )Proceeds
      from convertible debentures
            
            
            175,000
            
            
            
            -
            
            
            
            175,000
            
            
            
            520,071
            
            
            
            -
            
            
            
            (520,071
            )Proceeds
      from convertible debentures - discontinued
            
            
            -
            
            
            
            1,000,000
            
            
            
            -
            
            
            
            1,000,000
            
            
            
            -
            
            
            
            -Repayment
      of long term debt
            
            
            (205,142
            )
            
            
            -
            
            
            
            (205,142
            )
            
            
            (56,439
            )
            
            
            -
            
            
            
            56,439Cash
      provided by (used in) financing activities
            
            
            2,102,027
            
            
            
            487,987
            
            
            
            2,102,027
            
            
            
            1,123,617
            
            
            
            -
            
            
            
            (635,630
            )Net
      Increase in Cash
            
            
            (127,838
            )
            
            
            58,699
            
            
            
            (127,838
            )
            
            
            (424,371
            )
            
            
            -
            
            
            
            483,070Cash
      at Beginning of Period
            
            
            1,116,003
            
            
            
            188
            
            
            
            1,116,003
            
            
            
            951,307
            
            
            
            -
            
            
            
            (951,119
            )Cash
      at End of Period
            
            $
            988,165
            
            
            $
            58,887
            
            
            $
            988,165
            
            
            $
            526,936
            
            
            $
            -
            
            
            $
            (468,049
            )Cash
      paid during the year for:Interest
            
            $
            226,415
            
            
            $
            -
            
            
            $
            226,415
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Income
      taxes
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -SUPPLEMENTAL
      STATEMENT OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Acquisition
      of Technology License
            
            $
            -
            
            
            $
            211,328
            
            
            $
            -
            
            
            $
            211,328
            
            
            $
            -
            
            
            $
            -Assets
      acquired by issuance of equity
            
            $
            -
            
            
            $
            33,825
            
            
            $
            -
            
            
            $
            33,825
            
            
            $
            -
            
            
            $
            -Conversion
      of convertible debt and accrued interest into common stock
            
            $
            158,322
            
            
            $
            66,610
            
            
            $
            158,322
            
            
            $
            66,610
            
            
            $
            -
            
            
            $
            -Warrants
      issued with debt
            
            $
            728,170
            
            
            $
            712,125
            
            
            $
            728,170
            
            
            $
            712,125
            
            
            $
            -
            
            
            $
            -Convertible
      debentures issued in exchange for notes payable
            
            $
            2,299,662
            
            
            $
            -
            
            
            $
            2,299,662
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Discount
      recorded upon issuance of derivative
            
            $
            1,097,109
            
            
            $
            -
            
            
            $
            1,097,109
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
















17




ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





FORWARD
LOOKING STATEMENTS




In
addition to historical information, this Quarterly Report contains
forward-looking statements, which are generally identifiable by use of the words
"believes," "expects," "intends," "anticipates," "plans to," "estimates,"
"projects," or similar expressions. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in the section entitled "Business Risk Factors." Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. We undertake no obligation to
revise or publicly release the results of any revision to these forward-looking
statements.




OVERVIEW




Seaway
Valley Capital Corporation is a venture capital and leveraged buyout investment
company that focuses primarily on equity and equity-related investments in
companies that require expansion capital and in companies pursuing acquisition
strategies. Seaway Valley will consider investment opportunities in a number of
different industries, including retail, consumer products, restaurants, media,
business services, and manufacturing. The Company will also consider select
technology investments.  Returns are intended to be in the form of the
eventual share appreciation and dispossession of those equity stakes and income
from loans made to businesses.




RETAIL
HOLDINGS




On
October 23, 2007, Seaway Valley acquired all of the capital stock of WiseBuys
Stores, Inc.  WiseBuys was organized in 2003 and owned and operated five
retail stores in central and northern New York.  On November 7, 2007,
Seaway Valley purchased all of the outstanding capital stock of Patrick Hackett
Hardware Company, a New York corporation.  Hackett’s, one of the nation’s
oldest retailers, with roots dating back to 1830, is a full line department
store specializing in premium, name brand merchandise and full service hardware.
 At the time of the acquisition, Hackett’s had locations in five towns in
upstate New York.  Each store features brand name clothing for men, women,
and children, and a large selection of athletic, casual, and work footwear.
 Hackett’s also carries domestics, home décor, gifts, seasonal merchandise
and sporting goods.  Hackett’s full service hardware department features
traditional hardware, tool, plumbing, paint and electrical departments.
 WiseBuys will contribute its retail assets to Hackett’s, and management
intends to convert the five WiseBuys stores into the Hackett’s brand stores.
 After the store conversions and one closure and one new store, the Company
will operate ten Hackett’s locations - Canton, Gouverneur, Hamilton, Massena,
Ogdensburg, Potsdam, Pulaski, Sackets Harbor, Tupper Lake, and Watertown – all
in New York.




Hackett’s
maintains strong vendor relationship with some of the industry’s premier
clothing providers including: The North Face, Carhartt, Patagonia, Levi’s,
Columbia, Woolrich and many other similar companies.  These brands command
premium prices and maintain strong customer loyalty in the marketplace based on
years of consumer preference based on both style and the quality of the
merchandise.  Hackett’s also carries premier footwear from providers
including Nike, Asics, New Balance, Red Wing, Georgia Boot, Crocs, and
Timberland.  These brands also command premium prices in the marketplace
based on years of consumer preference based on both style and the quality of the
merchandise.




Hackett’s,
which in 2007 operated five stores with approximately 138,000 square feet of
retail sales floor, averaged sales per square foot of approximately $108.18 for
the year.  After taking over the WiseBuys stores in 2008 and with the
Sackets Harbor new store openings, Hackett’s will operate locations with total
sales floor square footage of 326,700 square feet.




We expect
Hackett’s to transition each former WiseBuys store throughout 2008.  Seaway
Valley will continue to financially and operationally support Hackett’s, whether
through company or asset acquisitions or general expansion.




Result
of Operations




Three Months Ended March 31,
2008 Compared with Three Months Ended March 31, 2007




The
Company’s net sales increased to $3,136,212 for fiscal period ended March 31,
2008 from $0 for fiscal period ended March 31, 2007, an increase of $3,136,212.
 The increase in sales was the result of the acquisition of WiseBuys and
Hackett’s, which took place on October 23, 2007 and November 7, 2007,
respectively.




The
Company’s cost of goods sold also increased from $0 for the first three months
of 2007 to $2,397,841 during the same period in 2008. This led to a $738,371
increase in our gross margin to $738,371 for fiscal period ended March 31, 2008
from $0 for fiscal period ended March 31, 2007.




Net
realized and unrealized gain on the sale of securities was $52,932 during the
period ended March 31, 2008 versus $0 for the same period ended March 31, 2007,
an increase of $52,932.




Our
general and administrative expenses during the three months ended March 31, 2008
were $2,282,462 versus $1,810,654 for the same period in 2007. The increase to
$471,808 was driven by the acquisitions of the Company’s operating subsidiaries,
WiseBuys and Hackett’s.




Seaway
Valley Capital Corporation had an operating loss of $1,491,159 for the first
three months of fiscal 2008 versus a loss of $1,810,654 for the same period
ended March 31, 2007.







18







We
incurred a loss from continuing operations of $2, 930,356 for the first three
months in fiscal 2008, compared to a loss of $2,794,109 for the same period in
2007.  The primary drivers of the 2008 loss were the increases in SG&A
expenses, the expenses associated with the conversion of WiseBuys stores to
Hackett’s stores, and the loss of potential revenues while these stores are
being converted.  Management feels that these conversions will be
completed prior to the fourth quarter 2008 or the first quarter of
2009.




On July
1, 2007, when Seaway Capital, Inc. acquired control of the Company from
GreenShift Corporation, the Company sold its operating businesses to GS
CleanTech Corporation, an affiliate of GreenShift, in return for the assumption
by GS CleanTech of a $1,125,000 convertible debenture owed by the Company (See
Note 15 to the Consolidated Financial Statements).  These operations –
considered “discontinued operations” - resulted in a loss of $2,028,150 during
the period ended March 31, 2007.




Net
losses for the periods ended March 31, 2008 and March 31, 2007 were $2,930,356
and $4,822,259, respectively.  The primary drivers for the losses in 2008
were expenses relating to the increased overhead associated with Hackett’s, the
expenses related to the WiseBuys store conversions, and the reduced sales
revenues suffered during store conversions.




Liquidity
and Capital Resources




Our
operations have been funded to date primarily by loans (both bank loans and more
recently convertible debentures), contributions by our founders and their
associates, and profitable securities sales at Seaway Valley Fund, LLC.
 The net amount of the bank loans is reflected on our March 31, 2008
balance sheet in the aggregate amount of $8,749,901. The net amount of the
convertible debentures is reflected on our March 31, 2008 balance sheet in the
aggregate amount of $3,647,509.




As a
result, to increase the Company’s liquidity and to help fund operations, the
Company secured a $5 million inventory-based line of credit from Wells Fargo in
March 2008.  Concurrently, YA Global Investments, LP acquired over $2.249
million of the Company’s legacy senior bank debt, most of which was due at that
time.  The purchase and exchange of this debt into convertible debentures
by YA Global materially lowered that Company’s immediate cash needs by $2.249
million and also allowed the Company to maintain significantly more available
capital under the Wells Fargo line of credit.  In addition, the Company
expects to receive capital from Golden Gate Investors, Inc. to satisfy its
Promissory Note asset of $1.1 million during 2008.




As a
result, we have the capital resources necessary to carry on operations for the
next period, despite continuing losses.  In order to implement our revised
business plan, however, we will need substantial additional capital, including
the funds associated with any of the Company’s notes receivable
outstanding.




The
Company expects to fund its operations and capital expenditures from internally
generated funds as well as additional outside capital, which may come in the
form of equity or debt.  Management believes that its existing cash
balances will be sufficient to meet its short term working capital, capital
expenditures, and investment requirements for at least the next 6 to 12 months.
Hackett’s or the Company may require additional funds for other purposes, such
as acquisitions of complementary businesses, and may seek to raise such
additional funds through public and private equity financings or from other
sources. However, management cannot assure you that additional financing will be
available at all or that, if available, such financing will be obtainable on
terms favorable to us or that any additional financing will not be
dilutive.




BUSINESS
RISK FACTORS




There are
many important factors that have affected, and in the future could affect,
Seaway Valley Capital Corporation's business, including but not limited to the
factors discussed below, which should be reviewed carefully together with other
information contained in this report. Some of the factors are beyond our control
and future trends are difficult to predict.




The
issuance of shares under our convertible debentures agreements could increase
the total common shares outstanding by 81%.




The
holders of the debentures could convert such debentures into approximately
807,466,375 shares based on the market price on March 31, 2008. Such issuances
would reduce the percentage of ownership of our existing common stockholders.
This result could detrimentally affect our ability to raise additional equity
capital. In addition, the sale of these additional shares of common stock may
cause the market price of our stock to decrease.




Seaway
Valley Capital Corporation is not likely to hold annual shareholder meetings in
the next few years.




Delaware
corporation law provides that members of the board of directors retain authority
to act until they are removed or replaced at a meeting of the shareholders. A
shareholder may petition the Delaware Court of Chancery to direct that a
shareholders meeting be held. But absent such a legal action, the board has no
obligation to call a shareholders meeting. Unless a shareholders meeting is
held, the existing directors elect directors to fill any vacancy that occurs on
the board of directors. The shareholders, therefore, have no control over the
constitution of the board of directors, unless a shareholders meeting is held.
Management does not expect to hold annual meetings of shareholders in the next
few years, due to the expense involved. Thomas Scozzafava, who is currently the
sole director of




Seaway
Valley Capital Corporation, was appointed to that position by the previous
directors. If other directors are added to the Board in the future, it is likely
that Mr. Scozzafava will appoint them. As a result, the shareholders of Seaway
Valley Capital Corporation will have no effective means of exercising control
over the operations of Seaway Valley Capital Corporation.




Investing
in our stock is highly speculative and you could lose some or all of your
investment.




The value
of our common stock may decline and may be affected by numerous market
conditions, which could result in the loss of some or the entire amount invested
in our stock. The securities markets frequently experience extreme price and
volume fluctuations that affect market prices for securities of companies
generally and very small capitalization companies such as us in
particular.





19







The
volatility of the market for Seaway Valley Capital Corporation common stock may
prevent a shareholder from obtaining a fair price for his shares.




The
common stock of Seaway Valley Capital Corporation is quoted on the OTC Bulletin
Board. It is impossible to say that the market price on any given day reflects
the fair value of Seaway Valley Capital Corporation, since the price sometimes
moves up or down by 50% or more in a week's time. A shareholder in Seaway Valley
Capital Corporation who wants to sell his shares, therefore, runs the risk that
at the time he wants to sell, the market price may be much less than the price
he would consider to be fair.





The
absence of independent directors on our board of directors may limit the quality
of management decision making.





Tom
Scozzafava is the only member of our Board of Directors.  There is no audit
committee of the board and no compensation committee.  This situation means
that Mr. Scozzafava will determine the direction of our company without the
benefit of an objective perspective and without the contribution of insights
from outside observers.  This may limit the quality of the decisions that
are made.  In addition, the absence of independent directors in the
determination of compensation may result in the payment of inappropriate levels
of compensation.




Our
common stock qualifies as a "penny stock" under SEC rules which may make it more
difficult for our stockholders to resell their shares of our common
stock.




Our
common stock trades on the OTC Bulletin Board. As a result, the holders of our
common stock may find it more difficult to obtain accurate quotations concerning
the market value of the stock. Stockholders also may experience greater
difficulties in attempting to sell the stock than if it were listed on a stock
exchange or quoted on the NASDAQ Global Market or the NASDAQ Capital Market.
Because our common stock does not trade on a stock exchange or on the NASDAQ
Global Market or the NASDAQ Capital Market, and the market price of the common
stock is less than $5.00 per share, the common stock qualifies as a "penny
stock." SEC Rule 15g-9 under the Securities Exchange Act of 1934 imposes
additional sales practice requirements on broker-dealers that recommend the
purchase or sale of penny stocks to persons other than those who qualify as an
"established customer" or an "accredited investor." This includes the
requirement that a broker-dealer must make a determination on the
appropriateness of investments in penny stocks for the customer and must make
special disclosures to the customer concerning the risks of penny stocks.
Application of the penny stock rules to our common stock affects the market
liquidity of the shares, which in turn may affect the ability of holders of our
common stock to resell the stock.




Only
a small portion of the investment community will purchase "penny stocks" such as
our common stock.




Seaway
Valley Capital Corporation common stock is defined by the SEC as a "penny stock"
because it trades at a price less than $5.00 per share. Seaway Valley Capital
Corporation common stock also meets most common definitions of a "penny stock,"
since it trades for less than $1.00 per share. Many brokerage firms will
discourage their customers from purchasing penny stocks, and even more brokerage
firms will not recommend a penny stock to their customers. Most institutional
investors will not invest in penny stocks. In addition, many individual
investors will not consider a purchase of a penny stock due, among other things,
to the negative reputation that attends the penny stock market. As a result of
this widespread disdain for penny stocks, there will be a limited market for
Seaway Valley Capital Corporation common stock as long as it remains a "penny
stock." This situation may limit the liquidity of your shares.




Hackett’s growth strategy of new
store openings and acquisitions could create challenges Hackett’s may not be
able to adequately meet.




Hackett’s
intends to continue to pursue growth for the foreseeable future, and to evolve
existing business to promote growth.  Hackett’s future operating results
will depend largely upon its ability to open and operate stores successfully and
to profitably manage a larger business.   Operation of a greater
number of new stores, moving or expanding store locations and expansion into new
markets may present competitive and merchandising challenges that are different
from those currently encountered by Hackett’s in existing stores and markets.
There can be no assurance that Hackett’s expansion will not adversely affect the
individual financial performance of its existing stores or the overall results
of operations.  Further, as the number of stores increases, Hackett’s may
face risks associated with market saturation of its products and concepts.
Finally, there can be no assurance that Hackett’s will successfully achieve
expansion targets or, if achieved, that planned expansion will result in
profitable operations.




This
growth strategy requires improving Hackett’s operations, and Hackett’s may not
be able to do this sufficiently to effectively prevent negative impact on its
business and financial results.




In order
to manage Hackett’s planned expansion, among other things, Hackett’s will need
to locate suitable store sites, negotiate acceptable lease terms, obtain or
maintain adequate capital resources on acceptable terms, source sufficient
levels of inventory, hire and train store managers and sales associates,
integrate new stores into existing operations and maintain adequate distribution
center space and information technology and other operations systems.  If
Hackett’s is unable to accomplish all of these tasks in a cost-effective manner,
its business plan will not be successful.




Hackett’s
needs to continually evaluate the adequacy of its management information and
distribution systems.




Implementing
new systems and changes made to existing systems could present challenges
management does not anticipate and could negatively impact Hackett’s business.
Hackett’s management cannot anticipate all of the changing demands that
expanding and changing operations will impose on business, systems and
procedures, and the failure to adapt to such changing demands could have a
material adverse effect on results of operations and financial condition.
Failure to timely implement initiatives necessary to support expanding and
changing operations could materially impact business.





20







The
success of Hackett’s business depends on establishing and maintaining good
relationships with mall operators and developers, and problems with those
relationships could make it more difficult for Hackett’s to expand to certain
sites or offer certain products.




Any
restrictions on Hackett’s ability to expand to new store sites, remodel or
relocate stores where management feels it necessary or to offer a broad
assortment of merchandise could have a material adverse effect on business,
results of operations and financial condition. If relations with mall operators
or developers become strained, or Hackett’s otherwise encounters difficulties in
leasing store sites, Hackett’s may not grow as planned and may not reach certain
revenue levels and other operating targets.  Risks associated with these
relationships are more acute given recent consolidation in the retail store
industry, and Hackett’s has seen certain increases in expenses as a result of
such consolidation that could continue.




If
Hackett’s fails to offer a broad selection of products and brands that customers
find attractive, Hackett’s revenues could decrease.




In order
to meet its strategic goals, Hackett’s must successfully offer, on a continuous
basis, a broad selection of appealing products that reflect customers’
preferences. Consumer tastes are subject to frequent, significant and sometimes
unpredictable changes. To be successful in Hackett’s line of business, product
offerings must be broad and deep in scope and affordable to a wide range of
consumers whose preferences may change regularly. Management cannot predict with
certainty that Hackett’s will be successful in offering products that meet these
requirements. If Hackett’s product offerings fail to satisfy customers’ tastes
or respond to changes in customer preferences, revenues could decline. In
addition, any failure to offer products that satisfy customers’ preferences
could allow competitors to gain market share.




Hackett’s
comparable store sales are subject to fluctuation resulting from factors within
and outside Hackett’s control, and lower than expected comparable store sales
could impact business and Seaway’s stock price.




A variety
of factors affects comparable store sales including, among others, the timing of
new product releases and fashion trends; the general retail sales environment
and the effect of the overall economic environment; Hackett’s ability to
efficiently source and distribute products; changes in Hackett’s merchandise
mix; ability to attain exclusivity and certain related licenses; competition
from other retailers; opening of new stores in existing markets and Hackett’s
ability to execute its business strategy efficiently. To date, Hackett’s
comparable store sales results have fluctuated significantly in the past, and
management believes that such fluctuations will continue.




Economic
conditions could change in ways that reduce Hackett’s sales or increase
Hackett’s expenses.




Certain
economic conditions affect the level of consumer spending on merchandise
Hackett’s offers, including, among others, employment levels, salary and wage
levels, interest rates, taxation and consumer confidence in future economic
conditions. Hackett’s is also dependent upon the continued popularity of malls
and strip malls as a shopping destination, the ability of other mall tenants and
other attractions to generate customer traffic and the development of new malls.
A slowdown in the United States economy or an uncertain economic outlook could
lower consumer spending levels and cause a decrease in mall traffic or new mall
development, each of which would adversely affect growth, sales results and
financial performance.




Changes
in laws, including employment laws and laws related to Hackett’s merchandise,
could make conducting Hackett’s business more expensive or change the way
Hackett’s does business.




In
addition to increased regulatory compliance requirements, changes in laws could
make ordinary conduct of Hackett’s business more expensive or require Hackett’s
to change the way it does business.  For example, changes in federal and
state minimum wage laws could raise the wage requirements for certain of
Hackett’s associates, which would likely cause management to reexamine Hackett’s
entire wage structure for stores. Other laws related to employee benefits and
treatment of employees, and privacy, could also negatively impact Hackett’s such
as by increasing benefits costs like medical expenses. Moreover, changes in
product safety or other consumer protection laws could lead to increased costs
for certain merchandise, or additional labor costs associated with readying
merchandise for sale. It is often difficult to plan and prepare for potential
changes to applicable laws.




Timing
and seasonal issues could negatively impact Hackett’s financial performance for
given periods.




Hackett’s
quarterly results of operations fluctuate materially depending on, among other
things, the timing of store openings and related pre-opening and other startup
expenses, net sales contributed by new stores, increases or decreases in
comparable store sales, releases of new products ,and shifts in timing of
certain holidays, changes in merchandise mix and overall economic and political
conditions.  Hackett’s business is also subject to seasonal influences,
with heavier concentrations of sales during the back-to-school, Halloween and
holiday (defined as the week of Thanksgiving through the first few days of
January) seasons and other periods when schools are not in session. The holiday
season has historically been the single most important selling season.
Management believes that in the locations where its stores are located, the
importance of the summer vacation and back-to-school seasons and to a lesser
extent, the spring break season as well as Halloween, all reduce the dependence
on the holiday selling season, but this will not always be the case to the same
degree. As is the case with many retailers of apparel, accessories and related
merchandise, Hackett’s typically experiences lower net sales in the first fiscal
quarter relative to other quarters.




Hackett’s
has many important vendor and license partner relationships, and Hackett’s
ability to obtain merchandise or provide it through license agreements could be
hurt by changes in those relationships, and events harmful to Hackett’s vendors
or license partners could impact results of operations.




Hackett’s
financial performance depends on Hackett’s ability to purchase desired
merchandise in sufficient quantities at competitive prices. Although Hackett’s
has many sources of merchandise, substantially all of Hackett’s music/pop
culture-licensed products are available only from vendors that have exclusive
license rights. In addition, small, specialized vendors, some of which create
unique products primarily for us, supply certain of Hackett’s products.
Hackett’s smaller vendors generally have limited resources, production
capacities and operating histories and some of Hackett’s vendors have restricted
the distribution of their merchandise in the past. Hackett’s generally has no
long-term purchase contracts or other contractual assurances of continued
supply, pricing or access to new products. There can be no assurance that
Hackett’s will be able to acquire desired merchandise in sufficient quantities
on acceptable terms in the future. Any inability to acquire suitable
merchandise, or the loss of one or more key vendors, may have a material adverse
effect on Hackett’s business, results of operations and financial
condition.





21




Competitors’ Internet sales could
hinder Hackett’s overall financial performance.




Hackett’s
sells merchandise that also can be purchased over the Internet through the other
retail websites. Hackett’s Internet operations do not yet include commerce, and
not having such operations could pose risks to Hackett’s overall
business.




Hackett’s is dependent for success on
a few key executive officers. Its inability to retain those officers would
impede its business plan and growth strategies, which would have a negative
impact on business and the potential value of any investment in Seaway.
  Loss of key people or an
inability to hire necessary and significant personnel could hurt Hackett’s
business.




Hackett’s
performance depends largely on the efforts and abilities of senior management.
The sudden loss of either’s services or the services of other members of
Hackett’s management team could have a material adverse effect on business,
results of operations, and financial condition.  Furthermore, there can be
no assurance that Mr. Scozzafava or the existing Hackett’s management team will
be able to manage growth or be able to attract and retain additional qualified
personnel as needed in the future.  Hackett’s can give no assurance that it
can find satisfactory replacements for these key executive officers at all, or
on terms that are not unduly expensive or burdensome to Hackett’s.
 Although Hackett’s intends to issue stock options or other equity-based
compensation to attract and retain employees, such incentives may not be
sufficient to attract and retain key personnel.





There
is a risk Hackett’s could acquire merchandise without full rights to sell it,
which could lead to disputes or litigation and hurt Hackett’s financial
performance and stock price.




Hackett’s
and its partners purchase licensed merchandise from a number of suppliers who
hold manufacturing and distribution rights under the terms of certain licenses.
Hackett’s generally rely upon vendors’ representations concerning manufacturing
and distribution rights and do not independently verify whether these vendors
legally hold adequate rights to licensed properties they are manufacturing or
distributing. If Hackett’s or its partners acquire unlicensed merchandise,
Hackett’s could be obligated to remove such merchandise from stores, incur costs
associated with destruction of merchandise if the distributor is unwilling or
unable to reimburse Hackett’s, and be subject to liability under various civil
and criminal causes of action, including actions to recover unpaid royalties and
other damages. Any of these results could have a material adverse effect on
business, results of operations and financial condition.




Hackett’s
faces intense competition, including competition from companies with
significantly greater resources than Hackett’s.  If Hackett’s is unable to
compete effectively with these companies, Hackett’s market share may decline and
its business could be harmed.




The
retail industry is highly competitive with numerous competitors, many of whom
are well-established. Most of Hackett’s competitors have significantly greater
financial, technological, managerial, marketing and distribution resources than
does Hackett’s. Their greater capabilities in these areas may enable them to
compete more effectively on the basis of price and more quickly offer new
products. In addition, new companies may enter the markets in which Hackett’s
competes, further increasing competition in the industry. Hackett’s may not be
able to compete successfully in the future, and increased competition may result
in price reductions, reduced profit margins, loss of market share and an
inability to generate cash flows that are sufficient to maintain or expand the
number of Hackett’s stores, which would adversely impact the trading price of
Seaway’s common shares.




Hackett’s
future operating results may fluctuate and cause the price of Seaway’s common
stock to decline.




Hackett’s
expects that Hackett’s revenues and operating results will continue to fluctuate
significantly from quarter to quarter due to various factors, many of which are
beyond Hackett’s control. The factors that could cause Hackett’s operating
results to fluctuate include, but are not limited to:




·
            seasonality
      of the business;




·
            price
      competition from other retailers;




·
            general
      price increases by suppliers and
manufacturers;




·
            Hackett’s
      ability to maintain and expand Hackett’s distribution
      relationships;




·
            increases
      in the cost of advertising;




·
            unexpected
      increases in shipping costs or delivery
times;




·
            Hackett’s
      ability to build and maintain customer
loyalty;




·
            the
      introduction of new services, products and strategic alliances by us and
      Hackett’s competitors;




·
            the
      success of Hackett’s brand-building and marketing
    campaigns;




·
            government
      regulations, changes in tariffs, duties, and
  taxes;




·
            Hackett’s
      ability to maintain, upgrade and develop Hackett’s retail
      stores;




·
            changes
      in Hackett’s store leasing costs;




·
            the
      amount and timing of operating costs and capital expenditures relating to
      expansion of Hackett’s business, operations and infrastructure;
      and




·
            general economic conditions as
      well as economic conditions specific to the retail
      sector.





22







If
Hackett’s revenues or operating results fall below the expectations of investors
or securities analysts, the price of Seaway Valley Capital Corporation’s common
stock could significantly decline.




Hackett’s
growth and operating results could be impaired if it is unable to meet its
future capital needs.




Hackett’s
may need to raise additional capital in the future to:




·
            fund
      more rapid expansion;




·
            acquire
      or expand into new retail locations, warehousing facilities or office
      space;




·
            maintain,
      enhance and further develop Hackett’s information technology
      systems;




·
            develop
      new product categories or enhanced
services;




·
            fund
      acquisitions; or




·
            respond
      to competitive pressures.




If
Hackett’s raises additional funds by issuing equity or convertible debt
securities, the percentage ownership of stockholders will be diluted.
Furthermore, any new securities could have rights, preferences and privileges
senior to those of the common stock. Hackett’s currently does not have any
commitments for additional financing. Hackett’s cannot be certain that
additional financing will be available when and to the extent required or that,
if available, it will be on acceptable terms. If adequate funds are not
available on acceptable terms, Hackett’s may not be able to fund its expansion,
develop or enhance Hackett’s products or services or respond to competitive
pressures.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
Applicable




ITEM
4. CONTROLS AND PROCEDURES




EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES




Our chief
executive officer and chief financial officer participated in and supervised the
evaluation of our disclosure controls and procedures (as defined in Rules
13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) that are designed to ensure that information
required to be disclosed by us in the reports that we file is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that the information required to be disclosed by us in the reports that
we file or submit under the Act is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
to allow timely decisions regarding required disclosure. The Company's chief
executive officer and chief financial officer determined that, as of the end of
the period covered by this report, these controls and procedures are adequate
and effective in alerting him in a timely manner to material information
relating to the Company that are required to be included in the Company's
periodic SEC filings.




There was
no change in internal controls over financial reporting (as defined in Rule
13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in
connection with the evaluation described in the preceding paragraph that
occurred during the Company’s first fiscal quarter that has materially affected
or is reasonably likely to materially affect the Company’s internal control over
financial reporting.




PART
II - OTHER INFORMATION




ITEM
1. LEGAL PROCEEDINGS




The
Company's WiseBuys subsidiary is party to the matter entitled Einar J. Sjuve vs.
WiseBuys Stores, Inc. et al, which action was filed in the Supreme Court of
Oswego County, New York in January 2008. The complaint involves an alleged slip
and fall that occurred at WiseBuys’ Pulaski, NY store in 2005.  The
Plaintiff is alleging damages in the amount of $125,000.  WiseBuys
intends to answer the complaint denying the majority of the
claims.  WiseBuys believes that it has adequate insurance coverage to
protect it against any potential liability for the claim.




ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




None
during the three months ended March 31, 2008




ITEM
3. DEFAULTS UPON SENIOR SECURITIES




None.




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




None.




ITEM
5. OTHER INFORMATION




None.





23




ITEM
6. EXHIBITS




The
following are exhibits filed as part of the Company's Form 10-QSB for the period
ended September 30, 2007:




Exhibit
Number Description




31.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.




32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of
2002.








24







SIGNATURES




Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on the date indicated.






SEAWAY VALLEY CAPITAL
    CORPORATION




By:
            /S/THOMAS
      SCOZZAFAVATHOMAS
      SCOZZAFAVAChairman,
      Chief Executive Officerand
      Chief Financial OfficerDate:
            May
      20, 2008








25