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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
October 26, 1999
Date of Report
(Date of Earliest Event Reported)
TORBAY HOLDINGS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Maison Soumarez
Route de Cobo
Castel, Guernsey GY5 7RZ
United Kingdom
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(Address of principal executive offices)
011 44 1481 46044
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(Registrant's telephone number)
TORBAY ACQUISITION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
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(Former name and former address)
Delaware 0-25417 98-0213494
- --------------- ------------ -------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") effective October 26, 1999 Torbay Holdings, Inc., a Delaware
corporation ("Holdings" or the "Company") acquired all of the outstanding shares
of common stock of Torbay Acquisition Corporation ("TAC") in a transaction in
which Holdings was the surviving company.
The Merger Agreement was adopted by the unanimous consent of the Board
of Directors of TAC and approved by the unanimous consent of the shareholders of
TAC on September 27, 1999. The Merger Agreement was adopted by the unanimous
consent of the Board of Directors of Holdings on September 27, 1999. The merger
was effected on October 26, 1999 by the filing of a certificate of merger with
the Secretary of State of Delaware.
Prior to the merger, TAC had 5,000,000 shares of common stock
outstanding. By virtue of the merger, Holdings acquired 100% of the issued and
outstanding common stock of TAC.
Prior to the merger, Holdings had an aggregate of 4,900,000 shares of
common stock issued and outstanding, and 700,000 shares of Series 1 Convertible
Preferred Stock outstanding.
Each share of Series 1 Convertible Preferred Stock is convertible into
ten shares of common stock of Holdings at such time or times, if any, that the
subsidiary of Holdings, whose common shares were acquired in exchange for the
Series 1 Convertible Preferred Stock, has returned a net profit to Holdings of
$1,000,000 in any one year within five years of issuance of such Series 1
Convertible Preferred Shares. In the event that after such five year term the
Series 1 Convertible Preferred Shares have not been so converted, each share not
then converted shall be automatically converted into one share of common stock
of Holdings. Each share of Series 1 Convertible Preferred Stock is entitled to
one vote on all matters on which such shareholders are entitled to vote and are
entitled to receive notice of or attend any annual or extraordinary meeting of
shareholders of Holdings.
Following the merger, Holdings had an aggregate of 5,150,000 shares of
common stock, and 700,000 shares of Series 1 Convertible Preferred Stock,
outstanding.
Following the merger, Holdings became the successor issuer to TAC for
reporting purposes under the Securities Exchange Act of 1934, as amended. The
officers, directors, and bylaws of Holdings continued without change as the
officers, directors, and bylaws of the successor issuer. See "Management" and
"Other Events" herein.
A copy of the Merger Agreement was filed as an exhibit to the Form 8-K
and is incorporated in its entirety herein. The foregoing description is
modified by such reference.
(b) The following table contains information regarding the
shareholdings of Holdings' current directors and executive officers and those
persons or entities who beneficially own more than 5% of its common stock:
Shares of Common Stock Percentage of Shares
Name, Position and Address Beneficially Owned (1) Of Common Stock Owned
- --------------------------------------------------------------------------------
Francis Guy Lewis Askham 50,000 *
Chairman, Director
Spinney Corner Church Lane
Brashfield
Romsey Harris 505OQH
United Kingdom
Colin Peter Gervaise-Brazier 525,000 (2) 10.19%
President, Director
La Belle Epoque
Les Treacheries
L'Islet St. Sampsons
Guernsey, Channel Islands GY2 4SN
United Kingdom
Alexander Gordon Lane 50,000 *
Secretary, Director
4 Milford Place
Hempstead, New York 11550
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William Thomas Large 119,000 (3) 2.03% (3)
Vice President, Director
38 Chapel Lane
Bucklow Hill, Knutsford
Cheshire WA16 6RH
United Kingdom
All directors and 744,000 (4) 12.72% (4)
Executive officers as
A group (4 persons)
Armadillo Worldwide Limited 500,000 9.71%
P.O. Box 313, Anson Court
La Route des Camps
St. Martins
Guernsey, Channel Islands
INC Limited 500,000 9.71%
C/o Trident Corporate
Services (Bahamas) Limited
1st Floor, Kings Court
Bay Street
P.O. Box N-3944
Nassau, Bahamas
Direct Trustees Limited 500,000 9.71%
P.O. Box 307
Guernsey GY1 3SH
United Kingdom
D.J. Limited 500,000 (5) 9.71%
10 Queen Street
P.O. Box HM114
Hamilton HMEX
Bermuda
David G. Jones 750,000 (5) 14.56%
10 Queen Street
P.O. Box HM 1154
Hamilton HMEX
Bermuda
Kevin W. Haddon-Harris 770,000 (5) 14.95%
48 Par La Ville Road
Hamilton, Bermuda HM11
Joanna Dorothy Gervaise-Brazier 375,000 7.28%
La Belle Epoque
Les Treacheries
L'Islet St. Sampsons
Guernsey, Channel Islands
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GY2 4SN
United Kingdom
Martyn Paul Trebert 508,000 9.86%
Pleinmont, Torteaval
Guernsey, Channel Islands
GY8 0P
United Kingdom
* Less than 1% percent
(1) Based upon 5,150,000 shares outstanding as of the date hereof
(2) Includes 150,000 shares owned by Colin Peter Gervaise-Brazier and
375,000 shares owned by Joanna Dorothy Gervaise-Brazier, Mr.
Gervaise-Brazier's wife.
(3) Includes common stock underlying Series 1 Convertible Preferred Stock.
Each share of Series 1 Convertible Preferred Stock is convertible into
ten shares of common stock of Holdings at such time or times, if any,
that the subsidiary of Holdings, whose common shares were acquired in
exchange for the Series 1 Convertible Preferred Stock, (Designer
Appliances) has returned a net profit to Holdings of $1,000,000 in any
one year within five years of issuance of such Series 1 Convertible
Preferred Shares. In the event that after such five year term the
Series 1 Convertible Preferred Shares have not been so converted, each
share not then converted shall be automatically converted into one
share of common stock of Holdings. The amount stated assumes conversion
on a 1:1 ratio, and a then- outstanding capitalization of 5,850,000
common shares after conversion. Includes 12,000 shares of Series 1
Convertible Preferred Stock given by Mr. Large to his minor children.
(4) Includes common stock underlying Series 1 Convertible Preferred Stock.
The stated amount assumes conversion on a 1:1 ratio, and a
then-outstanding capitalization of 5,850,000 common shares after
conversion.
(5) D.J. Limited is an investment partnership owned 50% each by David G.
Jones and Kevin W. Haddon- Harris. Half of D.J. Limited's shares are
allocated to Mr. Jones' beneficial ownership and half of D.J. Limited's
shares are allocated to Mr. Haddon-Harris. Mr. Haddon-Harris' ownership
also includes 20,000 shares owned by Mr. Haddon-Harris' wife.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Merger Agreement was
negotiated between TAC and Holdings.
In evaluating Holdings as a candidate for the proposed merger, TAC used
criteria such as the value of the assets of Holdings, particularly its Designer
Appliances Ltd. subsidiary, its product line, including the Telstar I and
Telstar II vacuum cleaners and the Mistral I desktop fan, other proposed
products, marketing research and experience, Holdings's current business
operations and anticipated operations, and Holdings' business name and
reputation. TAC determined that the consideration for the merger was reasonable.
In evaluating TAC as a candidate for the proposed merger, Holdings used
criteria such as TAC's status as a reporting company, its lack of operating
history and lack of potential related liabilities. Holdings determined that the
consideration for the merger was reasonable.
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(b) Holdings intends to continue developing and marketing its products
through its subsidiary Designer Appliances Ltd. ("Designer Appliances") with the
further development, marketing, and distribution of emerging products currently
under development.
BUSINESS
Holdings is a development stage company that, through its subsidiary
Designer Appliances, has developed and is preparing to market household
appliances designed to be attractive to a premium, upscale market. Holdings was
incorporated on March 24, 1999 as a Delaware corporation named Acropolis
Acquisition Corporation, which changed its name to Torbay Holdings, Inc. on July
14, 1999. Holdings acquired control of all of the common stock of Designer
Appliances Ltd. by an Agreement and Plan of Reorganization dated as of July 19,
1999 among Holdings, Designer Appliances and the shareholders of Designer
Appliances, who upon the effectiveness of the reorganization, became
shareholders of Holdings.
Management believes that it has identified an underexploited
opportunity in the premium-priced market for household and domestic appliances,
featuring attractively designed exteriors. There is no assurance that production
will be commenced or that the Company will be able to successfully manufacture
or market these items.
Torbay Holdings filed with the Securities and Exchange Commission (file
no. 333-93847) a registration statement on Form SB-2 for the offer and sale of
certain outstanding shares held by its securityholders. Holdings will not
receive any funds from the sale of such shares. Holdings may seek to raise
additional capital through a private placement of its securities. No assurance
can be made that Holdings will place any such securities or that production can
be commenced.
Operations
Some 300 units of the Telstar design vacuum cleaner have been produced
for testing and marketing trials. See "Products" herein. The Company will
subcontract component manufacture and initially be responsible for final product
assembly so as to manage product quality. Management may consider discontinuing
using subcontractors to increase profit margins at an appropriate time.
The Company will operate directly in the United Kingdom with its own
sales team. Potential distributors have been identified to expand this activity
across the European continent. Management believes that contracts may be
finalized when production and payment schedules can be predicted with reasonable
certainty. These distributors will purchase products and bear all costs of sales
and distribution in their territories. Non-critical component supply of "off the
shelf" items will be limited to preferred suppliers of appropriate components
who provide warranties and indemnities for delays in production and shipping.
Management believes that manufacturing contracts can be finalized when
production and payment schedules can be predicted with reasonable certainty.
Critical components such as product body parts which are specific to the
Company's products will be dual sourced.
The sales objectives are in what is believed to be a niche sector of
the appliance market which addresses the most expensive end of that market.
Sales activity will be focused upon designer retail outlets such as The Conran
Shops, Harrods and Selfridges. No contracts have been entered into to date, and
there is no assurance that any contracts will be entered into, or if entered
into, that any such contracts can be maintained.
Products
Telstar I Designer Vacuum Cleaner. A rocket shaped cylinder vacuum
cleaner made of polished aluminum and incorporating the latest in filtration
technology. It is bagless and features the High Efficiency Particle Arrester
(HEPA) medical grade filter that removes the allergens in dirt that are
associated with asthma. It has a large (50ft) cleaning radius that typically
allows for the entire floor of a modern dwelling to be cleaned without stopping.
The Telstar I will be built to British Electrical Approval Board and German TUV
standards,
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which relate to electrical safety and manufacturing practices. Manufacturing
costs at this time are (pound)100 per unit and as volume impacts component
purchasing this price is anticipated to reduce to (pound)80-85. This product is
expected to sell for (pound)150 to stores and (pound)300 retail.
Telstar II Designer Vacuum Cleaner/Table. This is the Telstar I vacuum
cleaner with a glass tabletop accessory. This product is designed for an
environment in the modern city flat or home where storage space is at a premium.
The Company may choose to market this product under the name "Sputnik" or as the
"Telstar Space Station." The table top is developed to working prototype and
additional expenditure is planned on tooling and packaging. This product is
expected to sell for (pound)100 to 125 above the cost of the Telstar I vacuum
cleaner. Manufacturing cost estimates are (pound)18 for the cost of the table
top.
Mistral I Desktop Fan. This is a desktop fan, cased in polished
aluminum, which utilizes the same "retro" design as the vacuum cleaner that
Designer Appliances has developed. The Mistral I fan is partially developed and,
pending financing, will be completed. Manufacturing cost estimates are
(pound)18. This product is expected to sell for (pound)60-70 to stores and
retail for (pound)100-125. The Mistral I fan is expected to be ready for sale in
January 2000.
Other products under development include a toaster, a kettle, space
heaters and heated hearth screens. See "Trademarks" herein.
Major Competitors
The Company believes that there is no cohesive product family in the
United Kingdom and Europe competing with the Company's proposed product line in
the upscale small domestic appliance sector.
Vacuum Cleaners. The Company is not aware of a competitor who
manufactures and sells a vacuum cleaner protected by this design. See
"Trademarks" herein. The Company not aware of a competitor who sells a vacuum
cleaner that converts to a piece of furniture when it is not in use.
For comparison the following table of the Company's product versus
others is provided for the Telstar I vacuum cleaner and other vacuum cleaners.
<TABLE>
<CAPTION>
Make Model Noise (dB) Cleaning Radius Dirt Capacity Weight (Kgs)
- ---- ----- ---------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Designer
Appliances Telstar I 67/66 16 m 10 liters 7.6
Electrolux Excellio Electronic 74 12.5m 4 7.8
Excellio Combi 74 12.5m 4 7.3
Excellio Remote 70 12.5m 4 7.3
Bosch Perfecta 85 72 9.5m 3.2 8.7
Activa 60 75 8.5m 3.8 7.2
Hoover Alpina Filtra N/A 12.5m 4 6.9
Alpina N/A 12.5 4 6.9
Miele S 324I 73 10m 4 8
S 251 73 9.5m 4 7.9
Dyson DCO2 67 9m (est.) 4 (est.) 6.3
</TABLE>
All data are taken from manufacturers' published marketing material.
Fans. The market in fans is diverse and is mainly made up of low-cost
plastic modeled products. There is no known dominant player in the United
Kingdom market. The design aesthetic of the Company's product is similar to that
of the Company's vacuum cleaner.
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Inventory
If and when production and sales are commenced, the Company intends to
stock up to two months' supply of component parts and one week's worth of
finished goods. Currently, the Company has 300 of the Telstar I vacuum cleaners
that it has produced and are not currently being offered for sale.
Raw Materials
Industry standard items are available from multiple suppliers. Product
specific items are at least dual sourced. However, there can be no assurance
that an adequate supply can be maintained.
Seasonality
Sales periods run throughout the year, though a peak cycle of demand is
noted in the spring and autumn months, especially for vacuum cleaners. Seasonal
variations are allowed for and are not considered a critical factor to the
Company's business as this time.
Property
Holdings has identified a manufacturing facility in the South
Manchester conurbation, United Kingdom, containing approximately 2,500-5,000
square feet, which is expected to accommodate requirements in the first 6-9
months of operation which it anticipates to lease when it has financing to do
so. Holdings currently leases office space in the parish of Castel, Guernsey, in
the Channel Islands. The Company has a one year lease at (pound)5,200 per annum
expiring August 30, 2000.
Patents and trademarks
The following trademark registrations or applications for registration
have been made with the British patent office. The design for the Telstar I
vacuum cleaner is protected by British registration no. 2066378. The name
"Telstar" is the subject of mark application no. 2 209 241. The name "Sputnik"
is the subject of trademark application no. 2 209 243. The table top design for
the Telstar II, Sputnik or Telstar Space Station, is the subject of a granted
registration of design no. 2082459. The trademark "Mistral" for the table top
fan is also the subject of application no. 2 209 473. The Company is also
considering a trademark registration for its toaster.
Litigation
None.
MARKET FOR HOLDINGS'S SECURITIES
There is currently no market for Holdings' securities.
MANAGEMENT
Name Age Title
- ---- --- -----
Colin Peter Gervaise-Brazier 56 President, Chief Executive Officer and
Director
Francis Guy Lewis Askham 68 Chairman and Director
Alexander Gordon Lane 58 Secretary and Director
William Thomas Large 44 Vice President and Director
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Colin Peter Gervaise-Brazier has been President, Chief Executive
Officer and a Director of Holdings, has served in such capacities since
September 1999. Mr. Gervaise-Brazier has been a retailing executive in Great
Britain for over 25 years. From October 1995 until September 1999, Mr.
Gervaise-Brazier was General Manager of Vale Garage, Ltd., the G.M. Vauxhall
Motors franchise for the Isle of Guernsey. Mr. Gervaise-Brazier attended
Elizabeth College, Guernsey, and also attended senior management courses at
Vauxhall College, Luton, England. Since August 1999, Mr. Gervaise-Brazier has
also been Chief Executive Officer and a director of GS Telecom Ltd., an
electronic retailing company whose stock trades on the NASDAQ Bulletin Board.
Francis Guy Lewis Askham, Chairman and a Director of Holdings, has
served in such capacities since October 1999. Mr. Askham is a Chartered
Accountant and consultant, and continues in such capacities. Mr. Askham
graduated from Hurstpierpoint College, Sussex, England, and is a Fellow of the
Fellow Institute of Chartered Accountants in England and Wales. Mr. Askham has
also served as a director and chairman of Wilshaw plc since 1991, a director and
deputy chairman of Southampton Leisure Holdings plc since January 1997, a
director of GS Telecoms, Inc. since August 1999, a director of International
Energy Group plc, and was formerly a director of Baldwin plc, M & W plc, and
Rhino Group plc, all located in Great Britain and all of whose securities trade
on the London Stock Exchange.
Alexander Gordon Lane, Secretary and a Director of Holdings, has served
in such capacities since October 1999. Mr. Lane has been a Financial Consultant
since 1998 and continues in such capacity. Mr. Lane has been in the financial
services business for over 30 years. From 1993 to 1998, he was a principal of
Intercontinental Exchange Partners, New York, as a capital markets broker in the
interest and foreign exchange areas. Mr. Lane has an aeronautics degree from
Wandsworth Technical College in London.
William Thomas Large has been Vice President and a Director of Holdings
since July 1999 and President of Designer Appliances since October 1998. From
October 1996 until October 1998, Mr. Large was Chairman, Chief Executive
Officer, a director and a major stockholder of DeltaTheta Ltd., a heating and
cooling technology company in Cheshire, England. From February 1997 until
September 1998, Mr. Large also served as a director of DeltaMonitor Ltd, a
medical devices company in Cheshire, England. From December 1996 until June
1997, Mr. Large also served as a director or SoundAlert Ltd, a company that
manufactured emergency vehicle sirens. From September 1994 until July 1996, Mr.
Large was a director of AromaScan plc, a publicly-listed instrumentation and
technology company in Cheshire, England. Mr. Large graduated from Manchester
Metropolitan University, in Manchester, England, and is the author or co-author
of eight articles and two books relating to biochemical analysis.
Executive Compensation
Mr. Askham currently receives no salary from the Company. The Company
anticipates that he will receive a salary of(pound)12,000 per year. He earns no
other remuneration from the Company or its subsidiary.
Mr. Gervaise-Brazier's salary is(pound)60,000 per year. He earns no
other remuneration from the Company or its subsidiary.
Mr. Lane currently receives no salary from the Company. After
capitalization, he will receive a salary of (pound)12,000 per year. He earns no
other remuneration from the Company or its subsidiary.
Mr. Large's salary is(pound)60,000 per year. He is eligible for a
performance bonus of up to 100% of his base salary.
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Related Transactions
Pursuant to a Deed of Assignment of Intellectual Property Rights by
William Thomas Large to Designer Appliances Ltd. dated June 10, 1999, Mr. Large
assigned all of his right, title and interest in and to the design rights to the
vacuum cleaner products, toaster, fan, kettle, space heater and heated hearth
screen products now being developed by the Company. Mr. Large's consideration
for the assignment consisted of 20,000 shares of common stock of Designer
Appliances (later exchanged for 107,000 shares of Series 1 Convertible Preferred
Stock of the Company), valued at (pound)20,000, and (pound)50,000 in cash to be
paid within six months of the date thereof. The terms of the assignment were not
the result of arms' length negotiations.
RISK FACTORS
Holdings is currently operating at a loss. Holdings has had no sales or
revenues to date. Holdings has maintained its operations to date through the
private placement of $600,000 of its securities. Its ability to develop
operations is dependent upon its ability to advertise its products and generate
sales of its products. If Holdings is unable to sell sufficient amount of its
products at a sufficiently profitable level, it will need to raise additional
capital through the placement of its securities or from other debt or equity
financing. If the Company is not able to raise such financing or to obtain
alternative sources of funding, management will be required to curtail
operations. There is no assurance that the Company will be able to continue to
operate if a sufficient level of sales cannot be generated.
Holdings commenced operations in 1999 and has a limited operating
history. Holdings commenced operations in 1999 and has only a limited history of
operations which to date have not been profitable. Its operations are subject to
the risks and competition inherent in the establishment of a relatively new
business enterprise. There can be no assurance that future operations will be
profitable. Revenues and profits, if any, will depend upon various factors,
including market acceptance of its concepts, market awareness, dependability of
its distribution network, and general economic conditions. There is no assurance
that Holdings will achieve its expansion goals and the failure to achieve such
goals would have an adverse impact on it.
Holdings is entering a competitive field. The market for upscale
household appliances is sought by numerous designers, manufacturers, wholesalers
and retailers, which may be better-known or have a better reputation or
distribution network than the Company. There is no assurance that the Company
will find suppliers and establish a distribution network, or whether its goods
will find a market sufficient to meet its financial obligations.
Holdings has a limited advertising budget. Goods aimed at a luxury
market are often marketed through the media, which charge concurrently high
advertising rates. The Company may not have the resources available to purchase
enough media exposure to find a market for its products.
The Company is dependent on its suppliers. The Company intends to enter
into supply contracts with at least two suppliers for each specific component of
its products. However, the Company currently has no contracts with suppliers,
and even if it establishes such contracts, there can be no assurance that supply
will be timely and meet the Company's requirements. Furthermore, there can be no
assurance that the Company's suppliers will maintain their relationship with the
Company.
The Company is dependant on retail outlets. The Company intends to
market its products through upscale department stores, boutiques and designer
outlets. However, there can be no assurance that the Company's marketing staff
will be able to persuade retail outlets to stock the Company's products, what
prominence those outlets will choose in shelving the Company's products, or once
shelved, whether the Company's products will be given a lower profile in the
future.
Holdings's issued preferred stock has conversion rights. Holdings has
designated and issued 700,000 shares of Series 1 Convertible Preferred Stock.
Each share of Series 1 Convertible Preferred Stock is convertible into ten
shares of common stock of Holdings at such time or times, if any, that the
subsidiary of Holdings, whose
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common shares were acquired in exchange for the Series 1 Convertible Preferred
Stock, has returned a net profit to Holdings of $1,000,000 in any one year
within five years of issuance of such Series 1 Convertible Preferred Shares. In
the event that after such five year term the Series 1 Convertible Preferred
Shares have not been so converted, each share not then converted shall be
automatically converted into one share of common stock of Holdings. Each share
of Series 1 Convertible Preferred Stock shall be entitled to one vote on all
matters on which such shareholders may vote. In addition, Holdings may, without
further action or vote by its shareholders, designate and issue additional
series or shares of preferred stock. The terms of the Series 1 Convertible
Preferred Stock may adversely affect the equity ownership of the holders of the
common stock and may in turn reduce the value of the common stock.
Trademark protection and proprietary marks. Notwithstanding the pending
registration of certain trade names with the British Trademark Office, there is
no assurance that Holdings will be able to enforce against use of any of its
marks. There is also no assurance that Holdings will be able to prevent
competitors from using the same or similar names, marks, concepts or appearances
or that it will have the financial resources necessary to protect its marks
against infringing use.
Issuance of future shares may dilute investors' share value. The
Certificate of Incorporation of Holdings authorizes the issuance of 100,000,000
shares of common stock and 20,000,000 shares of preferred stock. The future
issuance of all or part of the remaining authorized common stock may result in
substantial dilution in the percentage of the Company's common stock held by its
then-existing shareholders. Moreover, any common stock issued in the future may
be valued on an arbitrary basis by Holdings. The issuance of the Company's
shares for future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by investors, and might have
an adverse effect on any trading market, should a trading market develop for the
Company's common stock.
Current trading market for the Company's securities. There is no
current trading market for Holdings's common stock and there is no assurance
that one will develop. TAC had filed a registration statement on Form 10-SB with
the Securities and Exchange Commission and has been a reporting company under
the Securities Exchange Act of 1934. Holdings has effected the merger with TAC
and has become a successor issuer thereto in order to become a reporting company
under the Securities Exchange Act of 1934, as amended. Holdings intends to
register the common stock owned by its existing stockholders under the
Securities Act of 1933, as amended, in order to establish a trading market for
its common stock on the NASD Bulletin Board, however, no underwriter for the
registration will be retained, and no market makers have committed to becoming
market makers for the Company's common stock, and there is no assurance that any
market makers will do so. No assurance can be given that an active trading
market in the Company's securities will develop or be sustained.
Penny Stock Regulation. Upon commencement of trading in the Company's
stock, if such occurs (of which there can be no assurance) the Company's common
stock may be deemed a penny stock. Penny stocks generally are equity securities
with a price of less than $5.00 per share other than securities registered on
certain national securities exchanges or quoted on the Nasdaq Stock Market,
provided that current price and volume information with respect to transactions
in such securities is provided by the exchange or system. The Company's
securities may be subject to "penny stock rules" that impose additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouse). For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase of
such securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the "penny stock rules" require the delivery, prior
to the transaction, of a disclosure schedule prescribed by the Commission
relating to the penny stock market. The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information on the limited market in penny stocks.
Consequently, the "penny stock rules" may restrict the ability of broker-dealers
to sell the Company's securities. The foregoing required penny stock
restrictions will not
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apply to the Company's securities if such securities maintain a market price of
$5.00 or greater. There can be no assurance that the price of the Company's
securities will reach or maintain such a level.
Computer Systems Redesigned for Year 2000. Many existing computer
programs use only two digits to identify a year in such program's date field.
These programs were designed and developed without consideration of the impact
of the change in the century for which four digits will be required to
accurately report the date. If not corrected, many computer applications could
fail or create erroneous results by or following the year 2000 (the "Year 2000
problem"). Many of the computer programs containing such date language problems
have been corrected by the companies or governments operating such programs. The
Company's operations will be dependent upon the timely delivery of supplies
which deliveries and production may be delayed or canceled because of such Year
2000 problem computer failures, and by orders and payments by its retail
outlets, which may likewise be delayed or canceled. The Company does not know
what steps, if any, will have been taken by any of its suppliers or retail
outlets in regard to the Year 2000 problems. The Company's operations will be
severally curtailed if one or more of its suppliers or retail outlets were to
suffer Year 2000 problems. Furthermore, it is impossible to predict if the basic
utilities serving the company, or its suppliers or its retail outlets will
continue uninterrupted.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Upon effectiveness of the merger, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission,
Holdings became the successor issuer to TAC for reporting purposes under the
Securities Exchange Act of 1934 and elects to reports under the Act effective
October 26, 1999.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS
The consolidated audited financial statements for the period March 22,
1999 (inception) to July 23, 1999 and unaudited financial statements for the
period March 22, 1999 through November 30, 1999 are filed herewith.
11
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - CONSOLIDATED BALANCE SHEET AS OF
JULY 23, 1999
PAGE 3 - CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY FOR THE
PERIOD FROM MARCH 22, 1999 (INCEPTION)
TO JULY 23, 1999
PAGE 4 - 9 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Torbay Holdings, Inc. and Subsidiary
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Torbay Holdings,
Inc. and subsidiary (a development stage company) as of July 23, 1999 and the
related consolidated statement of changes in stockholders' equity for the period
from March 22, 1999 (inception) to July 23, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the financial position of Torbay Holdings, Inc.
and subsidiary (a development stage company) as of July 23, 1999, in conformity
with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
November 30, 1999
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF JULY 23, 1999
ASSETS
CURRENT ASSETS
Due from attorney's escrow $ 144,500
Stock subscription receivable 300,000
Prepaid expenses 2,000
---------
Total current assets 446,500
---------
OTHER ASSETS
Deferred acquisition and registration costs 25,000
Intangible assets 264,928
---------
Total other assets 289,928
---------
TOTAL ASSETS $ 736,428
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Note payable $ 155,840
Due to related party 77,920
---------
Total liabilities 233,760
---------
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001 par value,
20 million shares authorized, 700,000
Series 1 convertible shares issued
and outstanding 70
Common Stock, $.0001 par value, 100
million shares authorized, 4,850,000
issued and outstanding 485
Additional paid in capital 630,613
----------
631,168
Less stock subscription receivable (128,500)
----------
Total stockholders' equity 502,668
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 736,428
=========
See accompanying notes to consolidated financial statements.
2
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 22, 1999
(INCEPTION) TO JULY 23, 1999
<TABLE>
<CAPTION>
Deficit
Additional Accumulated
Common Stock Preferred Stock Paid-in During Devel- Subscriptions
Shares Amount Shares Amount Capital opment Stage Receivable Total
-------- ------- -------- ------ --------- ---------------- -------------- -------
Issuance of common stock
<S> <C> <C> <C> <C> <C> <C> <C> <C>
to founder 5,000,000 $ 500 - $ - $ - $ - - $ 500
Cancellation of original
founder shares (5,000,000) (500) - - - - - ( 500)
Issuance of preferred stock
for acquisition of
subsidiary - - 700,000 70 31,098 - - 31,168
Issuance of common stock
for cash 4,850,000 485 - - 599,515 - $(128,500) 471,500
Net income for the period
from March 22, 1999
(inception) to
July 23, 1999 - - - - - - - -
--------- ------- --------- ------- --------- ---------------- -------- --------
4,850,000 $ 485 700,000 $ 70 $ 630,613 $ - $(128,500) $502,668
========= ======= ========= ====== ========= ================ ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Torbay Holdings, Inc. (a development stage company) ("the Company") was
incorporated in Delaware under the name Acropolis Acquisition Corporation on
March 24, 1999 to serve as a vehicle to effect a merger, exchange of capital
stock, asset acquisition or other business combination with a domestic or
foreign private business. At July 23, 1999 the Company had not yet commenced any
operations, and all activity to date relates to the Company's formation,
business acquisition and proposed fund raising. The Company's fiscal year end is
December 31.
The Company's ability to commence operations is contingent upon its ability to
raise the capital it will require through the issuance of equity securities,
debt securities, bank borrowings or a combination thereof.
B. Agreement and Plan of Reorganization
In July 1999, the Company effected an Agreement and Plan of Reorganization
whereby the Company acquired all of the issued and outstanding securities of
Designer Appliances Limited a UK Corporation (DAL) in exchange for an aggregate
of 700,000 shares of the Company's Series 1 Convertible Preferred Stock. The
designation, preferences and rights of the Preferred Stock are detailed in Note
7A. As a result of the agreement, DAL became a wholly owned subsidiary of the
Company.
C. Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Torbay Holdings,
Inc. and its wholly owned subsidiary, Designer Appliances Limited. All
significant intercompany balances and transactions have been eliminated in the
consolidation. The financial statements of the UK subsidiary have been
translated into United States dollars at current exchange rates as to assets and
liabilities.
D. Use of Estimates
The preparation of the financial statements in conformity with 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
E. Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board of Financial Accounting Standards No. 109, "Accounting
4
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D
E. Income Taxes - Cont'd
for Income Taxes" ("Statement 109"). Under Statement 109, 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 basis. 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. Under Statement 109, 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. There were no current or deferred income tax
expenses or benefits due to the Company not having any operations for the period
ended July 23, 1999.
F. New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 129, "Disclosure of Information about
Capital Structure" establishes standards for disclosing information about an
entity's capital structure, is effective for financial statements for periods
ending after December 15, 1998 and has been adopted by the Company as of
December 31, 1998. Statement No. 130, "Reporting Comprehensive Income"
establishes standards for reporting and display of comprehensive income and its
components, and is effective for fiscal years beginning after December 15, 1997.
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial statements
for periods beginning after December 15, 1997. The Company believes that its
adoption of Statements 130 and 131 will not have a material effect on the
Company's financial position or results of operations.
NOTE 2 - DUE FROM ATTORNEY'S ESCROW
The Company had not yet established a bank account as of the balance sheet date.
The Company's attorney has been collecting and disbursing funds on behalf of the
Company via an escrow account. As of July 23, 1999, the balance of the escrow
account was $144,500 which represents the net of $171,500 of funds received for
common stock issuances (See Note 7B), $25,000 of funds disbursed for deferred
acquisition and registration costs (See Note 4) and $2,000 of funds disbursed
for prepaid expenses.
5
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
NOTE 3 - STOCK SUBSCRIPTION RECEIVABLE
On July 23, 1999, the Company issued 300,000 common shares to an individual in
exchange for a $300,000 stock subscription. This amount has been classified as a
current asset, instead of a reduction of equity, since the funds were received
on August 6, 1999, prior to the issuance of the financial statements.
NOTE 4 - DEFERRED ACQUISITION AND REGISTRATION COSTS
On June 2, 1999, the Company entered into a consulting agreement with TPG
Capital Corporation (See Note 9) for the future preparation and filing of forms
with the Securities and Exchange Commission and assistance with obtaining
listings and one or more market makers. The Company has paid $25,000 (See Note
2) towards this contract through July 23, 1999 which has been recorded as
deferred acquisition and registration costs. These costs will be written off in
the future against the funds generated from the filings and listings.
NOTE 5 - INTANGIBLE ASSETS
In June 1999, DAL, which was not a subsidiary of the Company at that time,
entered into an agreement for the purchase of all interests relating to the
registered and unregistered design rights of certain assets. The total purchase
price paid was $155,840, represented by a promissory note issued by DAL (See
Note 6) and acquired by the Company in the acquisition discussed in Note 1(B).
On June 10, 1999, DAL, which was not a subsidiary of the Company at that time,
entered into an agreement with a related party for the purchase of intellectual
property rights for certain products. The total purchase price for these rights
was $109,088. DAL issued shares of common stock in the amount of $31,168 in
addition to a note payable in the amount of $77,920 (See Note 6). Pursuant to
the acquisition discussed in Note 1(B), the Company acquired the note payable
and issued preferred stock in exchange for the $31,168 of common stock.
The cost of the above design rights and intellectual property rights will be
amortized over a five-year period. No amortization has been provided as of July
23, 1999, as the Company has not commenced operations. The Company is presently
exploring the development of this technology.
NOTE 6 - NOTES PAYABLE
The Company acquired an agreement with an individual to acquire all interests
relating to the registered and unregistered design rights of certain appliances
for a note in the amount of the purchase price of $155,840 (See Notes 1(B) and
5). The note is non-interest bearing and is to be paid upon receipt of the
unconditional assignment of the design rights to the Company.
6
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
NOTE 6 - NOTES PAYABLE - CONT'D
In addition, the Company acquired an agreement with a related party to acquire
several design rights of certain appliances at a purchase price of $109,088 (See
Notes 1(B) and 5). The Company issued shares of common stock in the amount of
$31,168 in addition to a note payable in the amount of $77,920. The note is
non-interest bearing and is to be fully paid within six months of the agreement
date of June 10, 1999.
NOTE 7 - STOCKHOLDERS' EQUITY
A. Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock at
$.0001 par value, with such designations, voting and other rights and
preferences as may be determined from time to time by the Board of Directors.
The Company designated 700,000 shares of its preferred stock as "Series 1
Convertible Preferred Stock". The par value of the series is $.0001. Each share
is convertible into ten shares of common stock of the Company at such time that
the subsidiary of the Company, for which such shares were used for the
acquisition thereof, has returned a net profit to the Company of $1,000,000 in
any one year within five years of issuance of such shares. In the event that
after such five-year term the shares have not been converted, each share not
converted shall be automatically converted into one share of common stock of the
Company. Each share of the Series 1 stock is entitled to one vote on all matters
on which such shareholders are lawfully entitled to vote and are not entitled to
receive dividends.
In July 1999, the Company issued 700,000 shares of Series 1 Convertible
Preferred Stock valued at $31,168 pursuant to an Agreement and Plan of
Reorganization with Designer Appliances Limited (See Notes 1B and 5).
B. Common Stock
The Company is authorized to issue 100,000,000 shares of common stock at $.0001
par value. The Company originally issued 5,000,000 shares to TPG Capital
Corporation in exchange for $500. They later cancelled those shares.
On July 23, 1999, the Company issued 4,850,000 shares of common stock to various
parties for gross proceeds of $600,000. At July 23, 1999, the Company had
received funds of $171,500 towards the stock issuance. The remaining proceeds to
be received are classified as a current stock subscription receivable asset of
$300,000 (See Note 3) and stock subscription receivable contra-equity in the
amount of $128,500.
7
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
NOTE 8 - RELATED PARTIES
As described in Notes 5 and 6, DAL purchased certain intangible assets from a
related party to DAL. Such assets were then acquired by the Company.
Legal counsel to the Company is a firm owned by a director of the Company who is
also the controlling owner of TPG Capital Corporation, a former shareholder of
the Company.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
On June 2, 1999, the Company entered into a consulting agreement with TPG
Capital Corporation ("TPG"), a former shareholder of the Company, for its
services and the services of its affiliates. The services relate to future
preparation and filing of forms with the Securities and Exchange Commission in
order to qualify as a publicly traded company, assisting the Company with
obtaining listings for its securities and introducing the Company to one or more
market makers.
The fee for these services is $150,000, of which $25,000 was paid on June 2,
1999 by the attorney's escrow account on behalf of the Company (See Note 2). The
$25,000 payment has been recorded in the financial statements as deferred
acquisition and registration costs (See Note 4). In addition to the above fee,
the Company granted TPG a five-year transferable warrant to acquire up to
250,000 registered shares of the Company's common stock at an exercise price of
$1.00 per share. The Company has yet to execute and deliver a form of common
stock purchase warrant agreement to TPG. Therefore, the accompanying financial
statements do not include any adjustments that might result from the issuance of
this warrant.
NOTE 10 - SUBSEQUENT EVENTS
A. Rule 506 Offering
On August 19, 1999 the Company entered into a subscription agreement, pursuant
to Rule 506 of the Securities and Exchange Commission, with a corporation for
the purchase of 50,000 shares of the Company's common stock for a total
subscription price of $5. As of the date of this audit report, the shares were
not issued.
B. Merger Agreement
Effective October 26, 1999, the Company and Torbay Acquisition Corp., an
inactive Delaware shell corporation and a reporting company under the Securities
Exchange Act of 1934, as amended, entered into and consummated a merger
agreement whereby the Company acquired all of the outstanding shares of common
stock of Torbay Acquisition Corp. in a transaction in which the Company remained
as the surviving entity and became the successor issuer pursuant to rule
12g-3(a) of the General Rules and Regulations of the Securities and Exchange
Commission.
8
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JULY 23, 1999
NOTE 10 - SUBSEQUENT EVENTS - CONT'D
C. Assignment of Designs
August 24, 1999, the Company and a related party entered into an "Assignment of
Designs" whereby the related party transferred all interests to the registered
and unregistered design rights of certain appliances upon receipt of amounts due
(See Note 6). The Company paid the $155,840 owed to the individual on
September 2, 1999 plus agreed legal costs.
D. Offering
The Company is in the process of filing form SB-2 to register common stock held
by Selling Securityholders.
9
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 1999
UNAUDITED
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1999
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 10,917
Due from attorney's escrow 8,831
Prepaid expenses 2,000
---------
Total current assets 21,748
---------
OTHER ASSETS
Deferred acquisition and registration costs 150,000
Intangible assets 264,928
---------
Total other assets 414,928
---------
TOTAL ASSETS $ 436,676
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Due to related party $ 77,920
---------
Total liabilities 77,920
---------
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001 par value,
20 million shares authorized, 700,000
Series 1 convertible shares issued
and outstanding 70
Common Stock, $.0001 par value, 100
million shares authorized, 5,100,000
issued and outstanding 510
Additional paid-in capital 630,588
Accumulated deficit (173,912)
---------
457,256
Less stock subscription receivable (98,500)
---------
Total stockholders' equity 358,756
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 436,676
=========
See accompanying notes to financial statements.
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 22, 1999 (INCEPTION)
THROUGH NOVEMBER 30, 1999
(UNAUDITED)
OPERATING EXPENSES
Directors Remuneration $ 32,600
Legal and professional services 67,556
Telephone 3,085
Rent expense 2,088
Computer Expenses 1,956
Consulting fees 39,120
Office and miscellaneous expenses 8,340
Auto Expenses 12,007
----------
Total Operating Expenses 166,752
----------
LOSS FROM OPERATIONS (166,752)
----------
OTHER EXPENSE
Interest expense 7,160
----------
Total Other Expense 7,160
----------
NET LOSS $ (173,912)
==========
See accompanying notes to financial statements.
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE PERIOD FROM MARCH 22, 1999
(INCEPTION) TO NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
Additional Accumulated
Common Stock Preferred Stock Paid-in During Devel- Subscriptions
Shares Amount Shares Amount Capital opment Stage Receivabl Total
-------- ------- -------- ------ --------- ---------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
to founder 5,000,000 $ 500 - $ - $ - $ - - $ 500
Cancellation of original
founder shares (5,000,000) (500) - - - - - ( 500)
Issuance of preferred stock
for acquisition of
subsidiary - - 700,000 70 31,098 - - 31,168
Issuance of common stock
for cash 4,850,000 485 - - 599,515 - $( 98,500) 501,500
Issuance of common stock in
connection with merger 250,000 25 - - ( 25) - - -
Net income for the period
from March 22, 1999 (inception)
to November 30, 1999 - - - - - (173,912) - (173,912)
--------- ------- --------- ------- --------- ---------------- -------- ----------
5,100,000 $ 510 700,000 $ 70 $ 630,588 $ (173,912) $( 98,500) $ 358,756
========= ======= ========= ======= ========= ================ ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 22, 1999(INCEPTION)
THROUGH NOVEMBER 30, 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (173,912)
----------
Net Cash used in Operating Activities (173,912)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (155,840)
Deferred acquisition & registration costs (125,000)
Proceeds from Subscription Receivable 330,000
----------
Net cash provided by
financing activities 49,160
----------
DECREASE IN CASH AND
CASH EQUIVALENTS (124,752)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 144,500
----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 19,748
==========
Cash paid during the period for:
Interest $ 7,160
See accompanying notes to financial statements.
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
AS OF NOVEMBER 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Torbay Holdings, Inc. (a development stage company) ("the Company") was
incorporated in Delaware under the name Acropolis Acquisition Corporation on
March 24, 1999 to serve as a vehicle to effect a merger, exchange of capital
stock, asset acquisition or other business combination with a domestic or
foreign private business. At November 30, 1999 the Company had not yet commenced
any operations, and all activity to date relates to the Company's formation,
business acquisition and proposed fund raising. The Company's fiscal year end is
December 31.
Effective October 26, 1999, the Company and Torbay Acquisition Corp., an
inactive Delaware shell corporation and a reporting company under the Securities
Exchange Act of 1934, as amended, entered into and consummated a merger
agreement whereby the Company acquired all of the outstanding shares of common
stock of Torbay Acquisition Corp. in a transaction in which the Company remained
as the surviving entity and became the successor issuer pursuant to rule
12g-3(a) of the General Rules and Regulations of the Securities and Exchange
Commission.
The Company's ability to commence operations is contingent upon its ability to
raise the capital it will require through the issuance of equity securities,
debt securities, bank borrowings or a combination thereof.
B. Agreement and Plan of Reorganization
In July 1999, the Company effected an Agreement and Plan of Reorganization
whereby the Company acquired all of the issued and outstanding securities of
Designer Appliances Limited a UK Corporation (DAL) in exchange for an aggregate
of 700,000 shares of the Company's Series 1 Convertible Preferred Stock. The
designation, preferences and rights of the Preferred Stock are detailed in Note
7A. As a result of the agreement, DAL became a wholly owned subsidiary of the
Company.
C. Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Torbay Holdings,
Inc. and its wholly owned subsidiary, Designer Appliances Limited. All
significant intercompany balances and transactions have been eliminated in the
consolidation. The financial statements of the UK subsidiary have been
translated into United States dollars at current exchange rates as to assets and
liabilities.
<PAGE>
D. Use of Estimates
The preparation of the financial statements in conformity with 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
E. Income Taxes
The Company accounts for income taxes under the Financial Accounting Standards
Board of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Under Statement 109, 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 basis. 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. Under
Statement 109, 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. There were no current or deferred income tax expenses or benefits due to
the Company not having any operations for the period ended November 30, 1999.
F. New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 129, "Disclosure of Information about
Capital Structure" establishes standards for disclosing information about an
entity's capital structure, is effective for financial statements for periods
ending after December 15, 1998 and has been adopted by the Company as of
December 31, 1998. Statement No. 130, "Reporting Comprehensive Income"
establishes standards for reporting and display of comprehensive income and its
components, and is effective for fiscal years beginning after December 15, 1997.
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial statements
for periods beginning after December 15, 1997. The Company believes that its
adoption of Statements 130 and 131 will not have a material effect on the
Company's financial position or results of operations.
NOTE 2 - DUE FROM ATTORNEY'S ESCROW
The Company's attorney has been collecting and disbursing funds on behalf of the
Company via an escrow account. As of November 30, 1999, the balance of the
escrow account was $8,831.
<PAGE>
NOTE 3 - DEFERRED ACQUISITION AND REGISTRATION COSTS
On June 2, 1999, the Company entered into a consulting agreement with TPG
Capital Corporation (See Note 9) for the future preparation and filing of forms
with the Securities and Exchange Commission and assistance with obtaining
listings and one or more market makers. The Company has paid $150,000 (See
Note 2) towards this contract through November 30, 1999 which has been recorded
as deferred acquisition and registration costs. These costs will be written off
in the future against the funds generated from the filings and listings.
NOTE 4 - INTANGIBLE ASSETS
In June 1999, DAL, which was not a subsidiary of the Company at that time,
entered into an agreement for the purchase of all interests relating to the
registered and unregistered design rights of certain assets. The total purchase
price paid was $155,840, represented by a promissory note issued by DAL (See
Note 5) and acquired by the Company in the acquisition discussed in Note 1(B).
On June 10, 1999, DAL, which was not a subsidiary of the Company at that time,
entered into an agreement with a related party for the purchase of intellectual
property rights for certain products. The total purchase price for these rights
was $109,088. DAL issued shares of common stock in the amount of $31,168 in
addition to a note payable in the amount of $77,920 (See Note 5). Pursuant to
the acquisition discussed in Note 1(B), the Company acquired the note payable
and issued preferred stock in exchange for the $31,168 of common stock.
The cost of the above design rights and intellectual property rights will be
amortized over a five-year period. No amortization has been provided as of
November 30, 1999, as the Company has not commenced operations. The Company is
presently exploring the development of this technology.
NOTE 5 - NOTES PAYABLE
The Company acquired an agreement with an individual to acquire all interests
relating to the registered and unregistered design rights of certain appliances
for a note in the amount of the purchase price of $155,840 (See Notes 1(B) and
4). As of November 30, 1999, the note has been paid in full.
In addition, the Company acquired an agreement with a related party to acquire
several design rights of certain appliances at a purchase price of $109,088 (See
Notes 1(B) and 5). The Company issued shares of common stock in the amount of
$31,168 in addition to a note payable in the amount of $77,920. The note is
non-interest bearing and was to be fully paid within six months of the agreement
date of June 10, 1999. The due date of the note was extended to June 10, 2000.
NOTE 6 - STOCKHOLDERS' EQUITY
A. Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock at
$.0001 par value, with such designations, voting and other
<PAGE>
rights and preferences as may be determined from time to time by the Board of
Directors.
The Company designated 700,000 shares of its preferred stock as "Series 1
Convertible Preferred Stock". The par value of the series is $.0001. Each share
is convertible into ten shares of common stock of the Company at such time that
the subsidiary of the Company, for which such shares were used for the
acquisition thereof, has returned a net profit to the Company of $1,000,000 in
any one year within five years of issuance of such shares. In the event that
after such five- year term the shares have not been converted, each share not
converted shall be automatically converted into one share of common stock of the
Company. Each share of the Series 1 stock is entitled to one vote on all matters
on which such shareholders are lawfully entitled to vote and are not entitled to
receive dividends.
In July 1999, the Company issued 700,000 shares of Series 1 Convertible
Preferred Stock valued at $31,168 pursuant to an Agreement and Plan of
Reorganization with Designer Appliances Limited (See Notes 1B and 4).
B. Common Stock
The Company is authorized to issue 100,000,000 shares of common stock at $.0001
par value. The Company originally issued 5,000,000 shares to TPG Capital
Corporation in exchange for $500. They later cancelled those shares.
On July 23, 1999, the Company issued 4,850,000 shares of common stock to various
parties for gross proceeds of $600,000. At November 30, 1999, the Company had
received funds of $171,500 towards the stock issuance. The remaining proceeds to
be received are classified as a current stock subscription receivable asset of
$300,000 (See Note 3) and stock subscription receivable contra-equity in the
amount of $128,500.
On October 26, 1999, 250,000 shares of common stock were issued to TPG Capital
Corporation (See Note 7) in connection with the merger with Torbay Acquisition
Corp. (See Note 1(A)).
NOTE 7 - RELATED PARTIES
As described in Notes 5 and 6, DAL purchased certain intangible assets from a
related party to DAL. Such assets were then acquired by the Company.
Legal counsel to the Company is a firm owned by a director of the Company who is
also the controlling owner of TPG Capital Corporation, a shareholder of the
Company.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
On June 2, 1999, the Company entered into a consulting agreement with TPG
Capital Corporation ("TPG"), a shareholder of the Company, for its services and
the services of its affiliates. The services relate to future preparation and
filing of forms with the Securities and
<PAGE>
Exchange Commission in order to qualify as a publicly traded company, assisting
the Company with obtaining listings for its securities and introducing the
Company to one or more market makers. The fee for these services is $150,000, of
which all has been paid as of November 30, 1999 by the attorney's escrow account
on behalf of the Company (See Note 2). The $150,000 payment has been recorded in
the financial statements as deferred acquisition and registration costs (See
Note 3). In addition to the above fee, the Company granted TPG a five-year
transferable warrant to acquire up to 250,000 registered shares of the Company's
common stock at an exercise price of $1.00 per share. The Company has yet to
execute and deliver a form of common stock purchase warrant agreement to TPG.
Therefore, the accompanying financial statements do not include any adjustments
that might result from the issuance of this warrant.
NOTE 9 - RULE 506 OFFERING
On August 19, 1999 the Company entered into a subscription agreement, pursuant
to Rule 506 of the Securities and Exchange Commission, with a corporation for
the purchase of 50,000 shares of the Company's common stock for a total
subscription price of $5. As of the date of these financial statements, the
shares were not issued.
NOTE 10 - SUBSEQUENT EVENTS
A. Offering
The Company is in the process of filing form SB-2 to register common stock held
by Selling Securityholders.
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
EXHIBITS
2.1** Agreement and Plan of Merger between Torbay Acquisition Corporation and
Torbay Holdings, Inc.
3.1** Certificate of Incorporation of Torbay Holdings, Inc., as amended
3.2** By-Laws of Torbay Holdings, Inc.
4.1** Certificate of Designation with respect to Series 1 Convertible
Preferred Stock of Torbay Holdings, Inc.
10.1* Deed of Assignment of Intellectual Property Rights by W. Thomas Large
to Designer Appliances Ltd. dated June 10, 1999
21.1* List of Subsidiaries of Torbay Holdings, Inc.
24.1* Consent of accountants
27.1* Financial Data Schedule
* Filed herewith
** Previously filed
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TORBAY HOLDINGS, INC.
By /s/ Colin Peter Gervaise-Brazier
--------------------------------
President, Director
Date: January __, 2000
Exhibit 10.1
Dated 10th June, 1999
WILLIAM THOMAS LARGE
And
DESIGNER APPLIANCES LTD
DEED OF ASSIGNMENT
OF
INTELLECTUAL PROPERTY RIGHTS
OWNED BY
WILLIAM THOMAS LARGE
<PAGE>
DEED OF ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
THIS ASSIGNMENT is made on: Dated 10th June 1999
BETWEEN:
1. WILLIAM THOMAS LARGE c/o 26 Batterbee Close, Haslington, Crewe,
Cheshire, CW1 5NN ("WTL")
2. DESIGNER APPLIANCES LTD (registered Company Number 3716661) whose
registered office is at Arkwright House, Parsonage Gardens, Manchester,
M3 2LE ("DAL")
RECITALS
WHEREAS WTL wholly owns DAL having incorporated DAL for the purpose of
exploiting Intellectual Property Rights ("IPR") into the Domestic Appliance
market.
WTL has designed and developed valuable Intellectual Property Rights hereinafter
detailed in the Schedule and has agreed to Assign such rights to DAL under the
terms and conditions hereinafter appearing.
NOW IT IS HEREBY AGREED:
DEFINITIONS
1. IN this agreement and schedules hereto unless otherwise requires the
following expressions shall have the following meanings:-
"Intellectual Property Rights" Means the registered and
unregistered design rights
to design concepts relating
to their shape, form and
function.
"Products" Refers to the use of the designs
assigned under this agreement
specifically to the Domestic
Appliance's market.
1.2 References herein to this "Agreement" shall be deemed to include the
Schedule hereto.
2. ASSIGNMENT
Pursuant to this Agreement and for the "Consideration" hereinafter
defined WTL hereby
<PAGE>
ASSIGNS absolutely to DAL free to encumbrances all its right and title
and interest in and to the IPR and all rights, powers, liberties and
immunities arising or accrued from them including the right to sue for
damages and other remedies in respect of any infringement of such
rights prior to the date hereof and the right to apply for, prosecute
and obtain registered design or similar protection throughout the world
in respect of designs in the applications including the right to claim
priority from them to the intent that the grant of a registered design
or similar protection shall be in the name of DAL.
3. FURTHER ASSURANCE
WTL further covenants that at the request and cost of DAL it will at a
time hereafter do all such acts and execute all such documents as may
reasonably be necessary or desirable to secure the vesting in DAL of
all rights assigned to DAL under this agreement, to assist the
prosecution of Applications and to assist in the resolution of any
question concerning the Applications including proceedings for their
infringement or impugning their validity.
4. WARRANTY
WTL warrants to DAL that the Applications stand in its own name and
that it has not been assigned or granted any licence under them to a
third party.
5. CONSIDERATION
DAL in consideration for the Assignment herein will pay WTL the sum
of(pound)70,000 as follows:-
(pound)20,000 as shares in DAL of the ordinary share capital of DAL
signatory to this agreement being deemed as fully paid and shares
issued within 14 days of completion.
(pound)50,000 to be fully paid to WTL within 6 months of the date of
this agreement.
6. LAW AND JURISDICTION
This Assignment shall be governed by and construed in accordance with
English law and the parties thereto submit to the jurisdiction of the
English courts.
IN WITNESS whereof this Assignment has been as a deed the day and year first
above written.
<PAGE>
SCHEDULE
Products Assigned under this Agreement.
1. The unregistered and registered design rights to a Table Top design for
a vacuum cleaner UK Patent Offices design registration Application
Number 2802459.
2. The design of a toaster known as the 'Wurlitzer',
3. The design of a fan known as the 'Typhoon'
4. The design of a kettle known as 'Thalia'
5. The designs for space heaters known as 'Desert Heat'
6. The designs for 'Heated Heath Screens'.
EXECUTED AND DELIVERED AS A
DEED BY WILLIAM THOMAS LARGE
EXECUTED AND DELIVERED AS A
DEED BY DESIGNER APPLIANCES LTD
Acting By
Director
Exhibit 21.1
Designer Appliances Ltd., a UK corporation
Exhibit 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form 8-K Current Report - Amendment No. 1 of
Torbay Holdings, Inc. our report for the period from March 22, 1999 (inception)
to July 23, 1999 dated November 30, 1999 relating to the financial statements of
Torbay Holdings, Inc. which appear in such Form 8-K/A.
WEINBERG & COMPANY, P.A.
Certified Public Accountants
Boca Raton, Florida
January 5, 2000
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<PERIOD-TYPE> 4-MOS 8-MOS
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