----

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| Delaware                                                        | 20-5996486          |
|-----------------------------------------------------------------|---------------------|
| (State of other jurisdiction of                                 | (IRS Employer       |
| incorporation 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) |

353,411,426 

----

|  ASSETS                                                                           |   | March 31, 2009 |        |   | December 31, 2008 |   |
|----------------------------------------------------------------------------------------|--------|----------------|-------------|--------|-------------------|--------|
| Current assets:                                                                        |   |           |        |   |              |   |
| Cash                                                                                   |   | $              | 158,678     |   |              | $      | 590,859 |   |
| Accounts receivable                                                                    |   |           | 290,583     |   |              |   | 401,157 |   |
| Inventories                                                                            |   |           | 5,435,924   |   |              |   | 7,416,788 |   |
| Notes receivable                                                                       |   |           | 1,695,675   |   |              |   | 1,749,092 |   |
| Marketable securities, trading                                                         |   |           | -           |   |              |   | - |   |
| Prepaid expenses and other assets                                                      |   |           | 56,127      |   |              |   | 104,852 |   |
| Refundable income taxes                                                                |   |           | 205,213     |   |              |   | 205,213 |   |
| Total current assets                                                                   |   |           | 7,842,200   |   |              |   | 10,467,961 |   |
| Property and equipment, net                                                            |   |           | 10,546,305  |   |              |   | 10,783,578 |   |
| Other Assets:                                                                          |   |           |        |   |              |   |   |   |
| Deferred financing fees                                                                |   |           | 224,400     |   |              |   | 246,597 |   |
| Investments                                                                            |   |           | 465,973     |   |              |   | 465,973 |   |
| Other assets                                                                           |   |           | 265,500     |   |              |   | 265,500 |   |
| Excess purchase price                                                                  |   |           | 3,284,193   |   |              |   | 3,284,193 |   |
| Security deposits                                                                      |   |           | 32,300      |   |              |   | 32,300 |   |
| Total other assets                                                                     |   |           | 4,272,366   |   |              |   | 4,294,563 |   |
| TOTAL ASSETS                                                                           |   | $              | 22,660,871  |   |              | $      | 25,546,102 |   |
|                                                                                   |   |           |        |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDER'S EQUITY                                                   |   |           |        |   |              |   |   |   |
| Current liabilities:                                                                   |   |           |        |   |              |   |   |   |
| Line of credit                                                                         |   | $              | 1,510,334   |   |              | $      | 3,065,117 |   |
| Accounts payable                                                                       |   |           | 8,511,093   |   |              |   | 7,454,894 |   |
| Accrued expenses                                                                       |   |           | 3,040,574   |   |              |   | 2,907,020 |   |
| Current portion of long term debt                                                      |   |           | 3,344,354   |   |              |   | 3,344,799 |   |
| Convertible debentures                                                                 |   |           | 3,117,839   |   |              |   | 1,735,638 |   |
| Liabilities of discontinued operations                                                 |   |           | 1,136,848   |   |              |   | - |   |
| Total current liabilities                                                              |   |           | 20,661,042  |   |              |   | 18,507,468 |   |
| Long term debt, net of current                                                         |   |           | 4,720,064   |   |              |   | 4,834,594 |   |
| Convertible debentures, net of current                                                 |   |           | 2,813,378   |   |              |   | 3,785,171 |   |
| Other liabilities                                                                      |   |           | 164,041     |   |              |   | 184,719 |   |
| Due to related party                                                                   |   |           | 8,000       |   |              |   | - |   |
| Total liabilities                                                                      |   |           | 28,366,525  |   |              |   | 27,311,952 |   |
|  Commitments and contingencies                                                    |   |           |  -     |   |              |   |  - |   |
|  STOCKHOLDERS' EQUITY                                                             |   |           |        |   |              |   |   |   |
| Series A voting preferred stock, $.0001 par value; 100,000                             |   |           |        |   |              |   |   |   |
| shares authorized; 0 and 0 shares issued and outstanding, respectively                 |   |           | -           |   |              |   | - |   |
| Series B voting preferred stock, $.0001 par value; 100,000                             |   |           |        |   |              |   |   |   |
| shares authorized; 0 and 100,000 shares issued and outstanding, respectively           |   |           | -           |   |              |   | - |   |
| Series C voting preferred stock, $.0001 par value; 1,600,000                           |   |           |        |   |              |   |   |   |
| shares authorized; 1,391,746 and 1,407,736 shares issued and outstanding, respectively |   |           | 139         |   |              |   | 141 |   |
| Series D voting preferred stock, $.0001 par value; 1,250,000                           |   |           |        |   |              |   |   |   |
| shares authorized; 881,065 and 881,065 shares issued and outstanding, respectively     |   |           | 88          |   |              |   | 88 |   |
| Series E voting preferred stock, $.0001 par value; 100,000                             |   |           |        |   |              |   |   |   |
| shares authorized; 100,000 and 100,000 shares issued and outstanding, respectively     |   |           | 10          |   |              |   | 10 |   |
| Common stock, $0.0001 par value, 10,005,000,000 authorized;                            |   |           |        |   |              |   |   |   |
| 3,454,123 and 2,744,523 shares issued and outstanding, respectively                    |   |           | 345         |   |              |   | 274 |   |
| Additional paid-in capital                                                             |   |           | 15,277,263  |   |              |   | 15,265,333 |   |
| Accumulated deficit                                                                    |   |           | (20,722,785 | )      |              |   | (17,034,508 | ) |
| Noncontrolling interest                                                                |   |           | (260,714    | )      |              |   | 2,812 |   |
| Total stockholders' equity (deficit)                                                   |   |           | (5,705,654  | )      |              |   | (1,765,850 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             |   | $              | 22,660,871  |   |              | $      | 25,546,102 |   |

----

SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES 

|                                                       |   | 2009   |       |   | 2008   |   |
|------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                       |   |   |       |   |   |   |
| Revenue                                                    |   | $      | 2,988,148  |   |   | $      | 2,653,041 |   |
| Cost of revenue                                            |   |   | 2,574,153  |   |   |   | 1,973,836 |   |
|                                                       |   |   |       |   |   |   |   |   |
| Gross profit                                               |   |   | 413,995    |   |   |   | 679,205 |   |
|                                                       |   |   |       |   |   |   |   |   |
| Gain on sale of securities, net                            |   |   | -          |   |   |   | 52,932 |   |
|                                                       |   |   |       |   |   |   |   |   |
| Operating expenses:                                        |   |   |       |   |   |   |   |   |
| Selling, general and administrative expenses               |   |   |       |   |   |   |   |   |
| (including stock based compensation of                     |   |   |       |   |   |   |   |   |
| $12,000 and $0 respectively)                               |   |   | 2,026,055  |   |   |   | 1,869,863 |   |
| Total operating expenses                                   |   |   | 2,026,055  |   |   |   | 1,869,863 |   |
|                                                       |   |   |       |   |   |   |   |   |
| Operating loss                                             |   |   | (1,612,060 | )      |   |   | (1,137,726 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Other income (expense):                                    |   |   |       |   |   |   |   |   |
| Unrealized gain (loss) on derivative instruments           |   |   | -          |   |   |   | (932,069 | ) |
| Interest expense                                           |   |   | (934,766   | )      |   |   | (497,919 | ) |
| Interest income                                            |   |   | -          |   |   |   | 37,392 |   |
| Other income (expense)                                     |   |   | 16,738     |   |   |   | (53,251 | ) |
| Total other income (expense)                               |   |   | (918,028   | )      |   |   | (1,445,847 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Loss from continuing operations                            |   |   | (2,530,088 | )      |   |   | (2,583,573 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Discontinued operations                                    |   |   |       |   |   |   |   |   |
| Loss on disposal of discontinued operations                |   |   | (1,114,370 | )      |   |   | - |   |
| Loss from discontinued operations                          |   |   | (304,532   | )      |   |   | (346,783 | ) |
| Total discontinued operations                              |   |   | (1,418,902 | )      |   |   | (346,783 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Loss before provision for income taxes                     |   |   | (3,948,990 | )      |   |   | (2,930,356 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Provision for income taxes                                 |   |   | -          |   |   |   | - |   |
|                                                       |   |   |       |   |   |   |   |   |
| Net loss                                                   |   |   | (3,948,990 | )      |   |   | (2,930,356 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Less: Net loss attributable to the noncontrolling interest |   |   | (263,525   | )      |   |   | - |   |
|                                                       |   |   |       |   |   |   |   |   |
| Net loss attributable to Parent Company                    |   | $      | (3,685,465 | )      |   | $      | (2,930,356 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Basic and diluted loss per share - continuing              |   | $      | (0.74      | )      |   | $      | (13.59 | ) |
| Basic and diluted loss per share - discontinued            |   |   | (0.41      | )      |   |   | (1.82 | ) |
| Basic and diluted loss per share                           |   | $      | (1.15      | )      |   | $      | (15.41 | ) |
|                                                       |   |   |       |   |   |   |   |   |
| Weighted average of shares of common stock                 |   |   |       |   |   |   |   |   |
| Outstanding, basic                                         |   |   | 3,215,702  |   |   |   | 190,220 |   |

----

SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES 

|                                                                      |   | 2009   |       |   | 2008   |   |
|---------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:                                     |   |   |       |   |   |   |
|  Continuing Operations                                               |   |   |       |   |   |   |
| Net loss from continuing operations                                       |   | $      | (2,530,088 | )      |   | $      | (2,583,573 | ) |
| Adjustments to reconcile net loss to net cash provided                    |   |   |       |   |   |   |   |   |
|    by continuing operating activities:                     |   |   |       |   |   |   |   |   |
| Deferred taxes                                                            |   |   | -          |   |   |   | - |   |
| Depreciation and amortization                                             |   |   | 184,859    |   |   |   | 90,629 |   |
| Gain on marketable securities                                             |   |   | -          |   |   |   | (52,434 | ) |
| Unrealized gain on derivatives                                            |   |   | -          |   |   |   | 932,069 |   |
| Amortization of deferred financing fees                                   |   |   | 22,197     |   |   |   | 35,496 |   |
| Stock based compensation                                                  |   |   | 12,000     |   |   |   | - |   |
| Amortization of debt discount                                             |   |   | 410,408    |   |   |   | 236,008 |   |
| Accrued interest                                                          |   |   | 136,182    |   |   |   | - |   |
| Change in assets and liabilities:                                         |   |   |       |   |   |   |   |   |
| Accounts receivable                                                       |   |   | 110,574    |   |   |   | 110,774 |   |
| Inventory                                                                 |   |   | 1,980,864  |   |   |   | 653,299 |   |
| Prepaid expenses and other assets                                         |   |   | 48,725     |   |   |   | 86,231 |   |
| Related party                                                             |   |   | 8,000      |   |   |   | - |   |
| Security deposits                                                         |   |   | -          |   |   |   | (12,011 | ) |
| Accounts payable                                                          |   |   | 1,056,199  |   |   |   | (1,457,754 | ) |
| Accrued expenses                                                          |   |   | 70,453     |   |   |   | 102,790 |   |
| Other liabilities                                                         |   |   | (20,678    | )      |   |   | - |   |
| Cash Provided by (Used in) Continuing Operating Activities                |   |   | 1,489,695  |   |   |   | (1,858,476 | ) |
| Discontinued operations                                                   |   |   |       |   |   |   |   |   |
| Net loss from discontinued operations                                     |   |   | (1,418,902 | )      |   |   | (346,783 | ) |
| Adjustments to reconcile net loss to net cash                             |   |   |       |   |   |   |   |   |
|   provided by discontinued operating activities:                |   |   |       |   |   |   |   |   |
| Deferred taxes                                                            |   |   | -          |   |   |   | - |   |
| Depreciation and amortization                                             |   |   | 72,097     |   |   |   | 18,273 |   |
|      Loss on disposal of discontinued operations |   |   | 1,114,370  |   |   |   | - |   |
| Change in assets and liabilities                                          |   |   |       |   |   |   |   |   |
| Accrued expenses                                                          |   |   | -          |   |   |   | - |   |
| Cash Used in Discontinued Operating Activities                            |   |   | (232,435   | )      |   |   | (328,510 | ) |
|                                                                      |   |   |       |   |   |   |   |   |
| Cash Provided By (Used in) Operating Activities                           |   | $      | 1,257,260  |   |   | $      | (2,186,986 | ) |

----

|                                                                   |   | 2009   |       |   | 2008   |   |
|------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| CASH FLOWS FROM INVESTING ACTIVITIES:                                  |   |   |       |   |   |   |
| Purchase of property and equipment                                     |   | $      | (19,683    | )      |   | $      | (42,879 | ) |
| Cash Used in investing activities                                      |   |   | (19,683    | )      |   |   | (42,879 | ) |
|                                                                   |   |   |       |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                  |   |   |       |   |   |   |   |   |
| Deferred financing fees                                                |   |   | -          |   |   |   | (260,000 | ) |
| Borrowings on (repayments of) line of credit                           |   |   | (1,554,783 | )      |   |   | 2,392,169 |   |
| Proceeds from convertible debentures                                   |   |   | -          |   |   |   | 175,000 |   |
| Repayment of long term debt                                            |   |   | (114,975   | )      |   |   | (205,142 | ) |
| Cash Provided (Used in) by financing activities                        |   |   | (1,669,758 | )      |   |   | 2,102,027 |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Net Decrease in Cash                                                   |   |   | (432,181   | )      |   |   | (127,838 | ) |
| Cash at Beginning of Period                                            |   |   | 590,859    |   |   |   | 1,116,003 |   |
| Cash at End of Period                                                  |   | $      | 158,678    |   |   | $      | 988,165 |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Cash paid during the period for:                                  |   |   |       |   |   |   |   |   |
|   Interest                                                        |   | $      | 271,991    |   |   | $      | 226,415 |   |
|   Income taxes                                                    |   | $      | 7,061      |   |   | $      | - |   |
|                                                                   |   |   |       |   |   |   |   |   |
| SUPPLEMENTAL STATEMENT OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Conversion of convertible debt and accrued interest into common stock  |   | $      | -          |   |   | $      | 158,322 |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Warrants issued with debt                                              |   | $      | -          |   |   | $      | 728,170 |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Conversion of preferred stock into common stock                        |   | $      | 2          |   |   | $      | - |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Convertible debentures issued in exchange for notes payable            |   | $      | -          |   |   | $      | 2,299,662 |   |
|                                                                   |   |   |       |   |   |   |   |   |
| Discount issued upon issuance of derivative                            |   | $      | -          |   |   | $      | 2,049,957 |   |

----

SEAWAY VALLEY CAPITAL CORPORATION 

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, 2009, the Company has generatedrevenues of $3 million but has incurred a net loss of approximately $4.0 million. The Company also has a working capital deficit and is in default on its credit facility. 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 matterscannot 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. 

----

Use of Estimates 

|                                       |   | Three Months Ended March 31, 2009 |       |
|--------------------------------------------|--------|-----------------------------------|------------|
|                                       |   | Retail                            |       |   | Hospitality |   |   | Investing |   |   | Total |   |
| Revenue                                    |   |                              |       |   |   |   |   |   |   |   |   |   |
| Merchandise sales and third party income   |   | $                                 | 2,200,021  |   |   | $ | 788,127 |   |   | $ | - |   |   | $ | 2,988,148 |   |
| Realized and unrealized gain on securities |   |                              | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total revenue                              |   |                              | 2,200,021  |   |   |   | 788,127 |   |   |   |   |   |   |   | 2,988,148 |   |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost and expenses                          |   |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenue                            |   |                              | 2,036,318  |   |   |   | 337,307 |   |   |   | - |   |   |   | 2,373,625 |   |
| Selling and administrative                 |   |                              | 1,662,492  |   |   |   | 557,030 |   |   |   | - |   |   |   | 2,219,522 |   |
| Interest expense                           |   |                              | 733,329    |   |   |   | 201,437 |   |   |   | - |   |   |   | 934,766 |   |
| Other income                               |   |                              | (16,738    | ) |   |   | - |   |   |   | - |   |   |   | (16,738 | ) |
| Total costs and expenses                   |   |                              | 4,415,401  |   |   |   | 1,095,774 |   |   |   | - |   |   |   | 5,518,236 |   |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations            |   | $                                 | (2,222,441 | ) |   | $ | (307,647 | ) |   | $ | - |   |   | $ | (2,523,027 | ) |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                               |   | $                                 | 14,697,962 |   |   | $ | 7,962,909 |   |   | $ | - |   |   | $ | 22,660,871 |   |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                       |   | $                                 | 19,683     |   |   | $ | - |   |   | $ | - |   |   | $ | 19,683 |   |

----

|                                       |   | Three Months Ended March 31, 2008 |       |
|--------------------------------------------|--------|-----------------------------------|------------|
|                                       |   | Retail                            |       |   | Investing |   | Total |   |
| Revenue                                    |   |                              |       |   |   |   |   |   |   |
| Merchandise sales and third party income   |   | $                                 | 2,653,041  |   |   | $ | - |   |   | $ | 2,653,041 |   |
| Realized and unrealized gain on securities |   |                              | -          |   |   |   | 52,932 |   |   |   | 52,932 |   |
| Total revenue                              |   |                              | 2,653,041  |   |   |   | 52,932 |   |   |   | 2,705,973 |   |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |
| Cost and expenses                          |   |                              |       |   |   |   |   |   |   |   |   |   |
| Cost of revenue                            |   |                              | 1,973,836  |   |   |   | - |   |   |   | 1,973,836 |   |
| Selling and administrative                 |   |                              | 1,869,863  |   |   |   | - |   |   |   | 1,869,863 |   |
| Share based compensation                   |   |                              | -          |   |   |   | - |   |   |   | - |   |
| Interest expense                           |   |                              | 497,919    |   |   |   | - |   |   |   | 497,919 |   |
| Unrealized loss on derivative instruments  |   |                              | 932,069    |   |   |   | - |   |   |   | 932,069 |   |
| Other expense                              |   |                              | 15,859     |   |   |   | - |   |   |   | 15,859 |   |
| Total costs and expenses                   |   |                              | 5,424,546  |   |   |   | - |   |   |   | 5,424,546 |   |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations   |   | $                                 | (2,636,505 | ) |   | $ | 52,932 |   |   | $ | (2,583,573 | ) |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |
| Total assets                               |   | $                                 | 19,033,566 |   |   | $ | 210,787 |   |   | $ | 19,244,353 |   |
|                                       |   |                              |       |   |   |   |   |   |   |   |   |   |
| Capital expenditures                       |   | $                                 | 42,879     |   |   | $ | - |   |   | $ | 42,879 |   |

|                                        |   | 2009   |       |   | 2008        |   |
|---------------------------------------------|--------|--------|------------|--------|-------------|--------|
|                                        |   | Retail |       |   | Hospitality |   |   | Total |   |   | Retail |   |   | Hospitality |   |   | Total |   |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                     |   | $      | 424,690    |   |        | $      | - |   |   | $ | 424,690 |   |   | $ | 597,233 |   |   | $ | - |   |   | $ | 597,233 |   |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenue                             |   |   | 330,588    |   |        |   | - |   |   |   | 330,588 |   |   |   | 416,324 |   |   |   | - |   |   |   | 416,324 |   |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SG&A expenses                           |   |   | 401,954    |   |        |   | - |   |   |   | 401,954 |   |   |   | 531,547 |   |   |   | - |   |   |   | 531,547 |   |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                            |   |   | -          |   |        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                      |   |   | 3,320      |   |        |   | - |   |   |   | 3,320 |   |   |   | 3,855 |   |   |   | - |   |   |   | 3,855 |   |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss on discontinued operations         |   | $      | (304,532   | )      |        | $      | - |   |   | $ | (304,532 | ) |   | $ | (346,783 | ) |   | $ | - |   |   | $ | (346,783 | ) |
|                                        |   |   |       |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss on disposal of discontinued operations |   | $      | (1,114,370 | )      |        | $      | - |   |   | $ | (1,114,370 | ) |   | $ | - |   |   | $ | - |   |   | $ | - |   |

On March 4, 2008, Seaway Valley Capital Corporation and its wholly owned subsidiaries, WiseBuys Stores, Inc. and Patrick Hackett Hardware Company, consummated a five million dollar ($5,000,000) credit and security agreement with Wells Fargo Bank, National Association,acting through its Wells Fargo Business Credit operating division (the "Line of Credit"). The funds available under Line of Credit were based on an advance rate of 55% of the Company's current inventory. The initial term of the Line of Credit was three years.  These funds were used for general working capital at the Company.  In early January 2009, Wells Fargo initiated an advance rate reduction (from the original 55% of inventory) by 1% per week.  In mid-January, Wells Fargo agreedto temporarily suspend the rate reduction in the event that Patrick Hackett Hardware Company raise an additional $2 million in equity capital or subordinated debt.  The Company was not successful in these capital raising efforts, and in February 2009 Wells Fargo again commenced the reduction of the advance rate.  On March 9th, March 18th andApril 2nd, Wells Fargo issued default notices under the credit agreement, citing various default events such as failure to reach Tangible Net Worth, Net Cash Flow and Net Income milestones, as well as citing a change of control event as it related to the ALRN transaction.  Additionally, Wells Fargo continued to reduce the advance rate, and the loan balance had been reduced from a peak of $4.7 million in December 2008 to approximately$1.2 million at this time. 

----

|                                                    |   | 2009   |       |
|---------------------------------------------------------|--------|--------|------------|
|                                                    |   |   |       |
| Convertible debentures                             |   | $      | 9,468,282  |   |
|                                                    |   |   |       |   |
| Less note discounts                                     |   |   | (3,537,065 | ) |
| Total convertible debentures, net of discounts          |   | $      | 5,931,217  |   |
|                                                    |   |   |       |   |
| Convertible debentures, current portion                 |   | $      | 3,989,440  |   |
| Less note discounts                                     |   |   | (871,601   | ) |
| Total current portion of convertible debentures         |   |   | 3,117,839  |   |
|                                                    |   |   |       |   |
| Convertible debentures, net of current portion          |   |   | 5,478,842  |   |
| Less note discounts                                     |   |   | (2,665,464 | ) |
| Total convertible debentures, net of current maturities |   |   | 2,813,378  |   |
|                                                    |   |   |       |   |
| Total convertible debentures, net of discounts          |   | $      | 5,931,217  |   |

NOTE9 – FAIR VALUE MEASUREMENTS 

|                                                 |   | Fair Value Measurements Using Significant |   |
|------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                 |   | Unobservable Inputs (Level 3)             |   |
|                                                 |   | Derivative Liability                      |   |
|                                                 |   | 2009                                      |   |   |   | 2008 |   |
|                                                 |   |                                      |   |   |   |   |   |
| Balance at January 1,                                |   | $                                         | -      |   |   | $ | 878,499 |   |
| Total unrealized (gains) losses included in earnings |   |                                      | -      |   |   |   | 932,069 |   |
| Debt discounts                                       |   |                                      | -      |   |   |   | 1,481,338 |   |
| Balance at March 31,                                 |   | $                                         | -      |   |   | $ | 3,291,906 |   |

----

| Amounts attributable to:                 |   |    |       |   |           |           |     |   |   |
|------------------------------------------|--------|---------|------------|--------|----------------|----------------|----------|--------|--------|
|                                     |   |    |       |   | Noncontrolling |           |     |   |   |
|                                     |   | Company |       |   | Interest       |           |     | Total  |   |
|                                     |   |    |       |   |           |           |     |   |   |
| Loss from continuing operations          |   | $       | (2,375,818 | )      |           | $              | (154,270 | )      |   | $ | (2,530,088 | ) |
| Loss from discontinued operations        |   |    | (1,309,647 | )      |           |           | (109,255 | )      |   |   | (1,418,902 | ) |
|                                     |   |    |       |   |           |           |     |   |   |   |   |   |
| Net loss                                 |   | $       | (3,685,465 | )      |           | $              | (263,525 | )      |   | $ | (3,948,990 | ) |
|                                     |   |    |       |   |           |           |     |   |   |   |   |   |
|                                     |   |    |       |   |           | Noncontrolling |     |   |   |   |   |
|                                     |   | Company |       |   | Interest       |           |     | Total  |   |
|                                     |   |    |       |   |           |           |     |   |   |   |   |   |
| Stockholders' Deficit at January 1, 2009 |   | $       | (1,768,662 | )      |           | $              | 2,812    |   |   | $ | (1,765,850 | ) |
| Net loss for the quarter                 |   |    | (3,685,465 | )      |           |           | (263,525 | )      |   |   | (3,948,990 | ) |
| Equity transactions, net                 |   |    | 9,187      |   |           |           | -        |   |   |   | 9,187 |   |
|                                     |   |    |       |   |           |           |     |   |   |   |   |   |
| Stockholders' Deficit at March 31, 2009  |   | $       | (5,444,940 | )      |           | $              | (260,713 | )      |   | $ | (5,705,653 | ) |

----

| SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES |   |
|----------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS                        |   |
| FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   | As Restated |   |   | As Previously Reported |   |   | Change |   |
|                                               |   | March 31, 2009 |   |   | December 31, 2008 |   |   | March 31, 2009 |   |   | December 31, 2008 |   |   | March 31, 2009 |   |   | December 31, 2008 |   |
| ASSETS                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                               |   | $ | 158,678 |   |   | $ | 590,859 |   |   | $ | 158,678 |   |   | $ | 590,859 |   |   | $ | - |   |   | $ | - |   |
| Accounts receivable                                |   |   | 290,583 |   |   |   | 401,157 |   |   |   | 290,583 |   |   |   | 401,157 |   |   |   | - |   |   |   | - |   |
| Inventories                                        |   |   | 5,435,924 |   |   |   | 7,416,788 |   |   |   | 5,435,924 |   |   |   | 7,416,788 |   |   |   | - |   |   |   | - |   |
| Notes receivable                                   |   |   | 1,695,675 |   |   |   | 1,749,092 |   |   |   | 1,695,675 |   |   |   | 1,749,092 |   |   |   | - |   |   |   | - |   |
| Marketable securities, available for sale          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Prepaid expenses and other assets                  |   |   | 56,127 |   |   |   | 104,852 |   |   |   | 56,127 |   |   |   | 104,852 |   |   |   | - |   |   |   | - |   |
| Refundable income taxes                            |   |   | 205,213 |   |   |   | 205,213 |   |   |   | 205,213 |   |   |   | 205,213 |   |   |   | - |   |   |   | - |   |
| Total current assets                               |   |   | 7,842,200 |   |   |   | 10,467,961 |   |   |   | 7,842,200 |   |   |   | 10,467,961 |   |   |   | - |   |   |   | - |   |
| Property and equipment, net (Note 3)               |   |   | 10,546,305 |   |   |   | 10,783,578 |   |   |   | 10,546,305 |   |   |   | 10,783,578 |   |   |   | - |   |   |   | - |   |
| Other Assets:                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred financing fees                            |   |   | 224,400 |   |   |   | 246,597 |   |   |   | 224,400 |   |   |   | 246,597 |   |   |   | - |   |   |   | - |   |
| Investments, at cost                               |   |   | 465,973 |   |   |   | 465,973 |   |   |   | 465,973 |   |   |   | 465,973 |   |   |   | - |   |   |   | - |   |
| Other Assets                                       |   |   | 265,500 |   |   |   | 265,500 |   |   |   | 265,500 |   |   |   | 265,500 |   |   |   | - |   |   |   | - |   |
| Excess purchase price                              |   |   | 3,284,193 |   |   |   | 3,284,193 |   |   |   | 3,284,193 |   |   |   | 3,284,193 |   |   |   | - |   |   |   | - |   |
| Security deposits (Note 11)                        |   |   | 32,300 |   |   |   | 32,300 |   |   |   | 32,300 |   |   |   | 32,300 |   |   |   | - |   |   |   | - |   |
| Total other assets                                 |   |   | 4,272,366 |   |   |   | 4,294,563 |   |   |   | 4,272,366 |   |   |   | 4,294,563 |   |   |   | - |   |   |   | - |   |
| TOTAL ASSETS                                       |   | $ | 22,660,871 |   |   | $ | 25,546,102 |   |   | $ | 22,660,871 |   |   | $ | 25,546,102 |   |   | $ | - |   |   | $ | - |   |

----

| SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES                                                                      |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS                                                                                             |   |
| FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008                                                                      |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDER'S EQUITY                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Line of credit                                                                                                          |   | $ | 1,510,334 |   |   | $ | 3,065,117 |   |   | $ | 1,510,334 |   |   | $ | 3,065,117 |   |   | $ | - |   |   | $ | - |   |
| Accounts payable                                                                                                        |   |   | 8,511,093 |   |   |   | 7,454,894 |   |   |   | 8,511,093 |   |   |   | 7,454,894 |   |   |   | - |   |   |   | - |   |
| Accrued expenses                                                                                                        |   |   | 3,040,574 |   |   |   | 2,907,020 |   |   |   | 3,040,574 |   |   |   | 2,907,020 |   |   |   | - |   |   |   | - |   |
| Current portion of long term debt                                                                                       |   |   | 3,344,354 |   |   |   | 3,344,799 |   |   |   | 3,344,354 |   |   |   | 3,344,799 |   |   |   | - |   |   |   | - |   |
| Convertible debentures                                                                                                  |   |   | 3,117,839 |   |   |   | 1,735,638 |   |   |   | 3,117,839 |   |   |   | 1,735,638 |   |   |   | - |   |   |   | - |   |
| Derivative liability - convertible debentures (Note 8)                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Liabilities of discontinued operations                                                                                  |   |   | 1,136,848 |   |   |   | - |   |   |   | 1,136,848 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total current liabilities                                                                                               |   |   | 20,661,042 |   |   |   | 18,507,468 |   |   |   | 20,661,042 |   |   |   | 18,507,468 |   |   |   | - |   |   |   | - |   |
| Long term debt, net of current                                                                                          |   |   | 4,720,064 |   |   |   | 4,834,594 |   |   |   | 4,720,064 |   |   |   | 4,834,594 |   |   |   | - |   |   |   | - |   |
| Convertible debentures payable, net - long term (Note 8)                                                                |   |   | 2,813,378 |   |   |   | 3,785,171 |   |   |   | 2,813,378 |   |   |   | 3,785,171 |   |   |   | - |   |   |   | - |   |
| Other liabilities                                                                                                       |   |   | 164,041 |   |   |   | 184,719 |   |   |   | 164,041 |   |   |   | 184,719 |   |   |   | - |   |   |   | - |   |
| Due to related parties                                                                                                  |   |   | 8,000 |   |   |   | - |   |   |   | 8,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total liabilities                                                                                                       |   |   | 28,366,525 |   |   |   | 27,311,952 |   |   |   | 28,366,525 |   |   |   | 27,311,952 |   |   |   | - |   |   |   | - |   |
| Commitments and contingencies (Note 11)                                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| STOCKHOLDERS' EQUITY                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Series A voting preferred stock, $.0001 par value; 100,000 shares authorized; no shares issued and outstanding          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Series B voting preferred stock, $.0001 par value; 100,000 shares authorized; 100,000 shares issued and outstanding     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Series C voting preferred stock, $.0001 par value; 4,800,000 shares authorized; 1,458,236 shares issued and outstanding |   |   | 139 |   |   |   | 141 |   |   |   | 139 |   |   |   | 141 |   |   |   | - |   |   |   | - |   |
| Series D voting preferred stock, $.0001 par value; XXXXX shares authorized; XXXXXX shares issued and outstanding        |   |   | 88 |   |   |   | 88 |   |   |   | 88 |   |   |   | 88 |   |   |   | - |   |   |   | - |   |
| Series E voting preferred stock, $.0001 par value; XXXXX shares authorized; XXXXXX shares issued and outstanding        |   |   | 10 |   |   |   | 10 |   |   |   | 10 |   |   |   | 10 |   |   |   | - |   |   |   | - |   |
| Common stock, $0.0001 par value, 2,500,000,000 authorized; 891,391,917 shares issued and outstanding                    |   |   | 345 |   |   |   | 274 |   |   |   | 345 |   |   |   | 274 |   |   |   | - |   |   |   | - |   |
| Additional paid-in capital                                                                                              |   |   | 15,277,263 |   |   |   | 15,265,333 |   |   |   | 15,277,263 |   |   |   | 15,265,333 |   |   |   | - |   |   |   | - |   |
| Accumulated deficit                                                                                                     |   |   | (20,722,785 | ) |   |   | (17,034,508 | ) |   |   | (20,519,013 | ) |   |   | (17,034,508 | ) |   |   | (203,772 | ) |   |   | - |   |
| Noncontrolling interest                                                                                                 |   |   | (260,714 | ) |   |   | 2,812 |   |   |   | (464,486 | ) |   |   | 2,812 |   |   |   | 203,772 |   |   |   | - |   |
| Total stockholders' deficiency                                                                                          |   |   | (5,705,654 | ) |   |   | (1,765,850 | ) |   |   | (5,705,654 | ) |   |   | (1,765,850 | ) |   |   | - |   |   |   | - |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                                                          |   | $ | 22,660,871 |   |   | $ | 25,546,102 |   |   | $ | 22,660,871 |   |   | $ | 25,546,102 |   |   | $ | - |   |   | $ | - |   |

----

| SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES                 |   |
|--------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS                              |   |
| FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008                 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   | As Restated |   |   | As Previously Reported |   |   | Change |   |
|                                                               |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                                            |   | $ | 2,988,148 |   |   | $ | 2,653,041 |   |   | $ | 2,988,148 |   |   | $ | 2,653,041 |   |   | $ | - |   |   | $ | - |   |
| Cost of revenue                                                    |   |   | 2,574,153 |   |   |   | 1,973,836 |   |   |   | 2,574,153 |   |   |   | 1,973,836 |   |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | 413,995 |   |   |   | 679,205 |   |   |   | 413,995 |   |   |   | 679,205 |   |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment gains (losses)                                          |   |   | - |   |   |   | 52,932 |   |   |   | - |   |   |   | 52,932 |   |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses                       |   |   | 2,026,055 |   |   |   | 1,869,863 |   |   |   | 2,026,055 |   |   |   | 1,869,863 |   |   |   | - |   |   |   | - |   |
| Total operating expenses                                           |   |   | 2,026,055 |   |   |   | 1,869,863 |   |   |   | 2,026,055 |   |   |   | 1,869,863 |   |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating loss                                                     |   |   | (1,612,060 | )) |   |   | (1,137,726 | ) |   |   | (1,612,060 | ) |   |   | (1,137,726 | ) |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forgiveness of the registration rights penalty                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Unrealized gain on derivative instruments                          |   |   | - |   |   |   | (932,069 | ) |   |   | - |   |   |   | (932,069 | ) |   |   | - |   |   |   | - |   |
| Interest expense                                                   |   |   | (934,766 | ) |   |   | (497,919 | ) |   |   | (934,766 | ) |   |   | (497,919 | ) |   |   | - |   |   |   | - |   |
| Interest income                                                    |   |   | - |   |   |   | 37,392 |   |   |   | - |   |   |   | 37,392 |   |   |   | - |   |   |   | - |   |
| Other income                                                       |   |   | 16,738 |   |   |   | (53,251 | ) |   |   | 16,738 |   |   |   | (53,251 | ) |   |   | - |   |   |   | - |   |
| Total other income (expense)                                       |   |   | (918,028 | ) |   |   | (1,445,847 | ) |   |   | (918,028 | ) |   |   | (1,445,847 | ) |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations                           |   |   | (2,530,088 | ) |   |   | (2,583,573 | ) |   |   | (2,530,088 | ) |   |   | (2,583,573 | ) |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued operations                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss on disposal of discontinued operations                        |   |   | (1,114,370 | ) |   |   | - |   |   |   | (682,414 | ) |   |   | - |   |   |   | (431,956 | ) |   |   | - |   |
| Loss from discontinued operations                                  |   |   | (304,532 | ) |   |   | (346,783 | ) |   |   | (186,488 | ) |   |   | (211,783 | ) |   |   | (118,044 | ) |   |   | (135,000 | ) |
| Total discontinued operations                                      |   |   | (1,418,902 | ) |   |   | (346,783 | ) |   |   | (868,902 | ) |   |   | (211,783 | ) |   |   | (550,000 | ) |   |   | (135,000 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before provision for income taxes                             |   |   | (3,941,929 | ) |   |   | (2,930,356 | ) |   |   | (3,398,990 | ) |   |   | (2,795,356 | ) |   |   | (550,000 | ) |   |   | (135,000 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                                         |   |   | - |   |   |   | - |   |   |   | 550,000 |   |   |   | 135,000 |   |   |   | (550,000 | ) |   |   | (135,000 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                           |   |   | (3,948,990 | ) |   |   | (2,930,356 | ) |   |   | (3,948,990 | ) |   |   | (2,930,356 | ) |   |   | - |   |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less: Net loss attributable to the minority                        |   |   | (263,525 | ) |   |   | - |   |   |   | (467,298 | ) |   |   | - |   |   |   | (203,773 | ) |   |   | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss attributable to Parent Company                            |   | $ | (3,688,277 | ) |   | $ | (2,930,356 | ) |   |   | (3,481,692 | ) |   | $ | (2,930,356 | ) |   |   | 203,773 |   |   | $ | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) per share from continuing operations – basic   |   | $ | (0.79 | ) |   | $ | (13.59 | ) |   | $ | (0.96 | ) |   | $ | (14.30 | ) |   | $ | 0.17- |   |   | $ | 0.71 |   |
| Income (loss) per share from discontinued operations – basic |   |   | (0.44 | ) |   |   |  (1.82 | ) |   |   |  (0.27 | ) |   |   |  (1.11 | ) |   |   | (0.17 | ) |   |   |  (0.71 | ) |
| Income (loss) per share – basic                              |   | $ | (1.23 | ) |   | $ | (15.41 | ) |   | $ | (1.23 | ) |   | $ | (15.41 | ) |   | $ | - |   |   | $ | - |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares of common stock outstanding – basic  |   |   | 3,215,702 |   |   |   | 190,220 |   |   |   | 3,215,702 |   |   |   | 190,220 |   |   |   | - |   |   |   | - |   |

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| SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES         |   |
|------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                      |   |
| FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008         |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   | As Restated |   |   | As Previously Reported |   |   | Change |   |
|                                                       |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing Operations                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss from continuing operations                        |   | $ | (2,530,088 | ) |   | $ | (2,583,573 | ) |   | $ | (3,080,088 | ) |   | $ | (2,718,573 | ) |   | $ | 550,000 |   |   | $ | 135,000 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Adjustments to reconcile net income (loss)                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| to net cash provided by continuing operating activities:   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Deferred taxes                                             |   |   | - |   |   |   | - |   |   |   | 550,000 |   |   |   | 135,000 |   |   |   | (550,000 | ) |   |   | (135,000 | ) |
| Depreciation and amortization                              |   |   | 184,859 |   |   |   | 90,629 |   |   |   | 184,859 |   |   |   | 90,629 |   |   |   | - |   |   |   | - |   |
| Gain on sale of marketable securities                      |   |   | - |   |   |   | (52,434 | ) |   |   | - |   |   |   | (52,434 | ) |   |   | - |   |   |   | - |   |
| Unrealized gain on derivative instruments                  |   |   | - |   |   |   | 932,069 |   |   |   | - |   |   |   | 932,069 |   |   |   | - |   |   |   | - |   |
| Amortization of deferred financing fees                    |   |   | 22,197 |   |   |   | 35,496 |   |   |   | 22,197 |   |   |   | 35,496 |   |   |   | - |   |   |   | - |   |
| Stock based compensation                                   |   |   | 12,000 |   |   |   | - |   |   |   | 12,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization of debt discount                              |   |   | 410,408 |   |   |   | 236,008 |   |   |   | 410,408 |   |   |   | 236,008 |   |   |   | - |   |   |   | - |   |
| Accrued interest                                           |   |   | 136,182 |   |   |   | - |   |   |   | 136,182 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Change in assets and liabilities:                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                        |   |   | 110,574 |   |   |   | 110,774 |   |   |   | 110,574 |   |   |   | 110,774 |   |   |   | - |   |   |   | - |   |
| Inventories                                                |   |   | 1,980,864 |   |   |   | 653,299 |   |   |   | 1,980,864 |   |   |   | 653,299 |   |   |   | - |   |   |   | - |   |
| Prepaid expenses and other assets                          |   |   | 48,725 |   |   |   | 86,231 |   |   |   | 48,725 |   |   |   | 86,231 |   |   |   | - |   |   |   | - |   |
| Related party                                              |   |   | 8,000 |   |   |   | - |   |   |   | 8,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Security deposits                                          |   |   | - |   |   |   | (12,011 | ) |   |   | - |   |   |   | (12,011 | ) |   |   | - |   |   |   | - |   |
| Accounts payable                                           |   |   | 1,056,199 |   |   |   | (1,457,754 | ) |   |   | 1,056,199 |   |   |   | (1,457,754 | ) |   |   | - |   |   |   | - |   |
| Accrued expenses                                           |   |   | 70,453 |   |   |   | 102,790 |   |   |   | 47,975 |   |   |   | 102,790 |   |   |   | 22,478 |   |   |   | - |   |
| Other liabilities                                          |   |   | (20,678 | ) |   |   | - |   |   |   | (20,678 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Cash Provided by (Used in) Continuing Operating Activities |   |   | 1,489,695 |   |   |   | (1,858,476 | ) |   |   | 1,467,217 |   |   |   | (1,858,476 | ) |   |   | 22,478 |   |   |   | - |   |
| Discontinued Operations                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   | - |   |
| Net loss from discontinued operations                      |   |   | (1,418,902 | ) |   |   | (346,783 | ) |   |   | (868,902 | ) |   |   | (211,783 | ) |   |   | (550,000 | ) |   |   | (135,000 | ) |
| Adjustments to reconcile net loss to net cash              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| provided by continuing operating activities:               |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Deferred taxes                                             |   |   | - |   |   |   | - |   |   |   | (550,000 | ) |   |   | (135,000 | ) |   |   | 550,000 |   |   |   | 135,000 |   |
| Depreciation and amortization                              |   |   | 72,097 |   |   |   | 18,273 |   |   |   | 72,097 |   |   |   | 18,273 |   |   |   | - |   |   |   | - |   |
| Loss on disposal of discontinued operations                |   |   | 1,114,370 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,114,370 |   |   |   | - |   |
| Change in assets and liabilities:                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Accrued expenses                               |   |   | - |   |   |   | - |   |   |   | 1,136,848 |   |   |   | - |   |   |   | (1,136,848 | ) |   |   | - |   |
| Cash Used in Discontinued Operating Activities             |   |   | (232,435 | ) |   |   | (328,510 | ) |   |   | (209,957 | ) |   |   | (328,510 | ) |   |   | (22,478 | ) |   |   | - |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Provided by (Used in) Operating Activities            |   |   | 1,257,260 |   |   |   | (2,186,986 | ) |   |   | 1,257,260 |   |   |   | (2,186,986 | ) |   |   | - |   |   |   | - |   |

----

| SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES                     |   |
|------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                  |   |
| FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008                     |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   | As Restated |   |   | As Previously Reported |   |   | Change |   |
|                                                                   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of property and equipment                                     |   |   | (19,683 | ) |   |   | (42,879 | ) |   |   | (19,683 | ) |   |   | (42,879 | ) |   |   | - |   |   |   | - |   |
| Cash Used in Investing Activities                                      |   |   | (19,683 | ) |   |   | (42,879 | ) |   |   | (19,683 | ) |   |   | (42,879 | ) |   |   | - |   |   |   | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOW FROM FINANCING ACTIVITIES:                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred financing fees                                                |   |   | - |   |   |   | (260,000 | ) |   |   | - |   |   |   | (260,000 | ) |   |   | - |   |   |   | - |   |
| Net borrowings on (repayments of) line of credit                       |   |   | (1,554,783 | ) |   |   | 2,392,169 |   |   |   | (1,554,783 | ) |   |   | 2,392,169 |   |   |   |   |   |   |   |   |   |
| Proceeds from convertible debentures                                   |   |   | - |   |   |   | 175,000 |   |   |   | - |   |   |   | 175,000 |   |   |   | - |   |   |   | - |   |
| Repayments of long term debt                                           |   |   | (114,975 | ) |   |   | (205,142 | ) |   |   | (114,975 | ) |   |   | (205,142 | ) |   |   | - |   |   |   | - |   |
| Cash Provided by (Used in) Financing Activities                        |   |   | (1,669,758 | ) |   |   | 2,102,027 |   |   |   | (1,669,758 | ) |   |   | 2,102,027 |   |   |   | - |   |   |   | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Increase in Cash                                                   |   |   | (432,181 | ) |   |   | (127,838 | ) |   |   | (432,181 | ) |   |   | (127,838 | ) |   |   | - |   |   |   | - |   |
| Cash at Beginning of Year                                              |   |   | 590,859 |   |   |   | 1,116,003 |   |   |   | 590,859 |   |   |   | 1,116,003 |   |   |   | - |   |   |   | - |   |
| Cash at End of Year                                                    |   | $ | 158,678 |   |   | $ | 988,165 |   |   | $ | 158,678 |   |   | $ | 988,165 |   |   | $ | - |   |   | $ | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the year for:                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                               |   | $ | 271,991 |   |   | $ | 226,415 |   |   | $ | - |   |   | $ | 226,415 |   |   | $ | 271,991 |   |   | $ | - |   |
| Income taxes                                                           |   | $ | 7,061 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 7,061 |   |   | $ | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL STATEMENT OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion of convertible debt and accrued interest into common stock  |   | $ | - |   |   | $ | 158,322 |   |   | $ | - |   |   | $ | 158,322 |   |   | $ | - |   |   | $ | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants issued with debt                                              |   | $ | - |   |   | $ | 728,170 |   |   | $ | - |   |   | $ | 728,170 |   |   | $ | - |   |   | $ | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion of preferred stock into common stock                        |   | $ | 2 |   |   | $ | - |   |   | $ | 2 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Convertible debentures issued in exchange for notes payable            |   | $ | - |   |   | $ | 2,299,662 |   |   | $ | - |   |   | $ | 2,299,662 |   |   | $ | - |   |   | $ | - |   |
|                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount issued upon issuance of derivative                            |   | $ | - |   |   | $ | 2,049,957 |   |   | $ | - |   |   | $ | 2,049,957 |   |   | $ | - |   |   | $ | - |   |

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|   | By:    | /s/    | THOMAS SCOZZAFAVA                 |   |
|--------|--------|--------|-----------------------------------|--------|
|   |   |   | THOMAS SCOZZAFAVA                 |   |
|   |   |   | Chairman, Chief Executive Officer |   |
|   |   |   | and Chief Financial Officer       |   |
|   | Date:  |   | September 4, 2009                 |   |

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