UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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 incorporation or organization)	(IRS Employer 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 ___ No  X 

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

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2008 (UNAUDITED) AND DECEMBER 31, 2007

ASSETS	March 31, 2008			December 31, 2007
Current assets:
Cash	$	988,165		$	1,116,003
Accounts receivable		212,583			323,357
Inventories		5,540,752			6,194,051
Notes receivable		2,200,000			1,200,000
Marketable securities, trading		210,787			158,353
Prepaid expenses and other assets		56,765			48,990
Refundable income taxes		226,026			320,032
Total current assets		9,435,078			9,360,786
Property and equipment, net		3,721,462			3,787,485
Other Assets:
Deferred financing fees		556,805			82,301
Other Assets		399,237			387,226
Excess purchase price		5,099,471			5,099,471
Security deposits		32,300			32,300
Total other assets		6,087,813			5,601,298
TOTAL ASSETS		19,244,353			18,749,569
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Line of credit		2,442,169			925,000
Accounts payable		1,675,955			3,133,709
Accrued expenses		830,424			719,099
Current portion of long term debt		3,166,303			3,075,869
Convertible debentures		1,529,622			946,328
Derivative liability - convertible debentures		3,291,906			878,499
Total current liabilities		12,936,379			9,678,504
Long term debt, net of current		3,141,429			4,800,874
Convertible debentures payable, net - long term		2,117,887			1,177,669
Due to related parties		12,500			12,500
Total liabilities		18,208,195			15,669,547
Commitments and contingencies		-			-
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; 81,250 shares issued and outstanding		10			10
Series C voting preferred stock, $.0001 par value; 4,800,000
shares authorized; 1,458,236 shares issued and outstanding		146			146
Common stock, $0.0001 par value, 2,500,000,000 authorized;
891,391,917 shares issued and outstanding		103,062			89,139
Additional paid-in capital		11,257,376			10,384,807
Accumulated deficit		(10,324,436	)		(7,394,080	)
Total stockholders' equity		1,036,158			3,080,022
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY	$	19,244,353		$	18,749,569

The notes to the consolidated financial statements are an integral part of these statements.

2

SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			2007
Revenue	$	3,136,212		$	994,736
Cost of revenue		2,397,841			620,744
Gross profit		738,371			373,992
Gain on sale of securities, net		52,932			449,661
Operating expenses:
Selling, general and administrative expenses		2,282,462			972,825
Share based compensation		-			1,810,654
Total operating expenses		2,282,462			2,783,479
Operating loss		(1,491,159	)		(1,959,826	)
Other income (expense):
Unrealized loss on derivative instruments		(932,069	)		(983,455	)
Interest expense		(497,919	)		(24,143	)
Interest income		37,392			5,953
Other income (expense)		(46,601	)		3,578
Total other income (expense)		(1,439,197	)		(998,067	)
Loss from continuing operations		(2,930,356	)		(2,957,893	)
Discontinued operations
Loss 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	)		(4,986,043	)
Provision for (benefit from) income taxes		-			192,571
Net loss	$	(2,930,356	)	$	(5,178,614	)
Basic and diluted loss per share	$	(0.00	)	$	(0.07	)
Weighted average of shares of common stock outstanding, basic		951,098,332			75,211,131

The notes to the consolidated financial statements are an integral part of these statements.

3

SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Continuing Operations
Net loss from continuing operations	$	(2,930,356	)	$	(3,150,484	)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Depreciation and amortization		108,902			29,504
Gain on marketable securities		(52,434	)		(449,661	)
Unrealized loss on derivatives		932,069			983,455
Amortization of deferred financing fees		35,496
Stock based compensation		-			1,810,654
Amortization of debt discount		236,008			90,498
Change in assets and liabilities:
Accounts receivable		110,774			(7,799	)
Inventory		653,299			235,380
Prepaid expenses and other assets		86,231			(4,578	)
Deferred income taxes		-			193,593
Other assets		-			4,336
Security deposits		(12,011	)		-
Accounts payable		(1,457,754	)		13,953
Accrued expenses		102,790			(26,306	)
Cash Used in Continuing Operating Activities		(2,186,986	)		(277,455	)
Discontinued operations
Net loss from discontinued operations		-			(1,932,174	)
Adjustments to reconcile net loss to net cash provided by discontinued operating activities
Depreciation and amortization		-			19,430
Loss from discontinued operations		-			(95,956	)
Unrealized loss on derivative instruments		-			1,406,250
Amortization of debt discount		-			130,710
Change in assets and liabilities
Accrued liabilities		-			42,452
Cash Used in Discontinued Operating Activities		-			(429,288	)
Cash Used in Operating Activities		(2,186,986	)		(706,743	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities		-			(841,245	)
Purchase of property and equipment		(42,879	)		-
Cash used in investing activities		(42,879	)		(841,245	)

The notes to the consolidated financial statements are an integral part of these statements.

4

SEAWAY VALLEY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			2007
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing fees		(260,000	)		-
Borrowings on line of credit		2,392,169			-
Repayments to related parties - discontinued		-			(661,190	)
Proceeds from issuance of preferred stock - subsidiary		-			321,175
Proceeds from convertible debentures		175,000			520,071
Proceeds from convertible debentures - discontinued		-			1,000,000
Repayment of long term debt		(205,142	)		(56,439	)
Cash provided by used in financing activities		2,102,027			1,123,617
Net Decrease in Cash		(127,838	)		(424,371	)
Cash at Beginning of Period		1,116,003			951,307
Cash at End of Period	$	988,165		$	526,936
Cash paid during the period for:
Interest	$	226,415		$	-
Income taxes	$	-		$	-
SUPPLEMENTAL STATEMENT OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of Technology License	$	-		$	211,328
Assets acquired by issuance of equity	$	-		$	33,825
Conversion of convertible debt and accrued interest    into common stock	$	158,322		$	66,610
Warrants issued with debt	$	728,170		$	712,125
Convertible 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 Annual Report on Form 10-KSB 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 $2.75 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.

6

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.

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.

7

NOTE 4 -SEGMENT INFORMATION

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

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

	Three Months Ended March 31, 2007
	Retail			Investing		Total
Revenue
Merchandise sales and third party income	$	994,736		$	-		$	994,736
Realized and unrealized gain on securities		-			449,661			449,661
Total revenue		994,736			449,661			1,444,397
Cost and expenses
Cost of revenue		620,744			-			620,744
Selling and administrative		972,825			-			972,825
Share based compensation		1,810,654			-			1,810,654
Interest expense		24,143			-			24,143
Unrealized loss on derivative instruments		983,455			-			983,455
Other income		(9,531	)		-			(9,531	)
Total costs and expenses		4,402,290			-			4,402,290
Income (loss) from continuing operations	$	(3,407,554	)	$	449,661		$	(2,957,893	)
Total assets	$	3,003,517		$	1,290,906		$	4,294,423
Capital expenditures	$	-		$	-		$	-

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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: 

			Weighted
			Average
			Exercise
	Shares		Price
Outstanding at December 31, 2006		-	$	-
Granted		1,636,000		1.32
Exercised		-		-
Forfeited		-		-
Outstanding at March 31, 2007		1,636,000	$	1.32
Exercisable at March 31, 2007		1,636,000	$	1.32
			Weighted
			Average
			Exercise
	Shares		Price
Outstanding at December 31, 2007		41,636,000		0.06
Granted		134,600,000		0.01
Exercised		-		-
Forfeited		-		-
Outstanding at March 31, 2008		176,236,000	$	0.02
Exercisable 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 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 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.

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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.	$	150,000
Convertible 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.		1,500,000
Convertible 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.		470,000
Convertible 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.		944,775
Convertible debenture due on December 10, 2011 provide for interest at 12% per annum and is convertible at the lesser of (a) $0.011 per share or (b) 75% of the closing market price for the day prior to the date of the holder's election to convert.		1.525,000
Convertible debentures due on November 30, 2010 provide for interest at 10% per annum and are convertible at the lesser of (a) $0.12 per share or (b) 90% of the average 3 lowest Volume Weighted Average Prices ("VWAP") during the 20 trading days prior to the holder's election to convert.		550,000
Convertible 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.		50,589
Convertible 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 average lowest Volume Weighted Average Price ("VWAP") during the 5 trading days prior to the holder's election to convert.		2,249,073
		7,439,437
Less note discounts		(3,791,928	)
Total convertible debentures, net of discounts	$	3,647,509
Convertible debentures, current portion	$	3,343,848
Less note discounts		(1,814,226	)
Total current portion of convertible debentures		1,529,622
Convertible debentures, net of current portion		4,095,589
Less note discounts		(1,977,702	)
Total convertible debentures, net of current maturities		2,117,887
Total 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.

10

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.

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.

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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, 2008 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 period ended March 31, 2008 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	$0.006
Exercise prices	$0.004-$0.006
Expected Term (Days)	1-20
Volatility	21%-90%
Risk-free interest rate	1.38%-1.62%

During the period ended March 31, 2008, holders of the aforementioned securities converted amounts totaling $158,322 into 139,231,091 shares of common stock.

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 Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative Liabilities	$	-	$	3,291,906	$	-
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.

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North Country’s (www.northcountryhospitality.com) 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 “Independence 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 Cantina offers 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.

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

Subsequent to the three months ended March 31, 2008, holders of certain convertible debentures converted amounts totaling $196,600 into 52,964,771 shares of common stock.

Subsequent to the three months ended March 31, 2008 the Company issued shares totaling 52,000,000 valued at $306,600 for services.

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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 $994,736 for fiscal period ended March 31, 2007, an increase of $2,141,476, or roughly 215%.  The increase in sales was the result of the acquisition of Hackett’s, which took place on November 7, 2007.  These additional Hackett’s sales helped offset lowered first quarter sales at the former WiseBuys stores.  

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As a result of the additional sales, the Company’s cost of goods sold also increased from $620,744 for the first three months of 2007 to $2,397,841 during the same period in 2008, which represents an increase of 286%.  This led to a 97.4% or $364,379 increase in our gross margin to $738,371 for fiscal period ended March 31, 2008 from $373,992 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 $449,661 for the same period ended March 31, 2007, a decrease of $396,729.

Our general and administrative expenses during the three months ended March 31, 2008 decreased by $501,017 to $2,282,462 versus $2,783,479 for the same period in 2007, which included $1.8 million in share based compensation.  Excluding the share based compensation, SG&A for the period ended March 31, 2007 was $972,825, and the increase to $2,282,462 was primarily driven by the increase in expenses related to 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 $1,959,826 for the same period ended March 31, 2007, which was a decrease in the loss of $468,667 or 24%.

We incurred a loss from continuing operations of $2, 930,356 for the first three months in fiscal 2008, compared to a loss of $2,957,893 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.

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.  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 $5,178,614, 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.

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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.

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.

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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.

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.

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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.

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.

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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;

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·   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.

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.

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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.

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

31.1 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.

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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 SCOZZAFAVA
	THOMAS SCOZZAFAVA
	Chairman, Chief Executive Officer and Chief Financial Officer
	May 20, 2008

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