U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR L5(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-25417
TORBAY HOLDINGS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 52-2143186
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
MAISON SAUMAREZ, ROUTE DE COBO
CASTEL, GUERNSEY, C.I. GY5 7RZ, UNITED KINGDOM
(Address of Principal Executive Offices)
011 44 1481 46044
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
OUTSTANDING AT
CLASS SEPTEMBER 30, 2000
----- ------------------
Common Stock, par value $.0001 5,150,000
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
TORBAY HOLDINGS, INC.
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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Part I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements................................................................................2
Item 2. Management's Discussion and Analysis................................................................7
Part II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................................................9
Item 2. Changes in Securities and Use of Proceeds...........................................................9
Item 3. Defaults Upon Senior Securities.....................................................................9
Item 4. Submission of Matters to a Vote of Security Holders.................................................9
Item 5. Other Information...................................................................................9
Item 6. Exhibits and Reports on Form 8-K....................................................................9
Signatures
</TABLE>
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Forward Looking Statements
This Quarterly Report on Form 10-QSB contains certain forward looking statements
consisting of estimates with respect to the financial condition, results of
operations and business of Torbay Holdings, Inc. that are subject to various
factors discussed in Torbay Holdings' Registration Statement on Form SB-2 and in
Torbay Holdings' Form 10-KSB for the year ended December 31, 1999, as amended,
which could cause actual results to differ materially from these estimates.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 INDEPENDENT ACCOUNTANTS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000
(UNAUDITED) AND DECEMBER 31, 1999
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30,
2000 AND FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO
SEPTEMBER 30, 2000 (UNAUDITED)
PAGE 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND FOR THE PERIOD
FROM MARCH 24, 1999 (INCEPTION) TO JUNE 30, 2000 (UNAUDITED)
PAGE 5 - 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of:
Torbay Holdings, Inc.
We have reviewed the accompanying consolidated balance sheet of Torbay Holdings,
Inc. and Subsidiary (a development stage company) as of September 30, 2000 and
the related consolidated statements of operations and comprehensive loss, and
cash flows for the three months and nine months then ended and for the period
from March 24, 1999 (inception) to September 30, 2000. These consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 5 to the
consolidated financial statements, the Company is a development stage company
that has accumulated losses since inception of $915,324 and has a working
capital deficiency of $298,446. These factors raise substantial doubt about its
ability to continue as a going concern. These consolidated financial statements
do not include any adjustments that might result from this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
November 6, 2000
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
2000 December 31,
(Unaudited) 1999
------------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 10,620 $ 11,690
Due from attorney's escrow 1,631 1,631
Subscription receivable 1,500 51,500
Accounts receivable 400 441
------------------- -----------------
Total Current Assets 14,151 65,262
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PROPERTY AND EQUIPMENT - NET 36,271 42,598
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OTHER ASSETS
Deposits 15,000 15,000
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Total Other Assets 15,000 15,000
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TOTAL ASSETS $ 65,422 $ 122,860
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 113,439 $ 64,964
Loan payable - line of credit 177,980 --
Due to related parties 14,200 12,932
Obligations under capital lease 6,978 7,706
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Total current liabilities 312,597 85,602
LONG TERM LIABILITIES
Convertible loan payable 50,000 --
Obligations under capital leases 7,668 29,648
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TOTAL LIABILITIES 370,265 115,250
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STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value, 20,000,000 shares authorized, 700,000 Series 1
convertible shares issued and outstanding 70 70
Common stock, $.0001 par value, 100,000,000 shares authorized, 5,150,000 and
5,150,000, respectively issued and outstanding 515 510
Additional paid-in capital 630,951 630,956
Accumulated deficit during development stage (915,324) (625,052)
Accumulated other comprehensive income (loss) (21,055) 1,126
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TOTAL STOCKHOLDERS' EQUITY (304,843) 7,610
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,422 $ 122,860
=================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
From March 24,
For the Three For the Nine 1999 (Inception)
Months Ended Months Ended to September 30,
September 30, 2000 September 30, 2000 2000
-------------------- ------------------- ----------------
<S> <C> <C> <C>
INCOME $ -- $ -- $ --
------------------ ----------------- ----------------
EXPENSES
Consulting and directors fees 19,315 135,983 334,961
Depreciation and amortization 777 2,425 33,247
Legal and professional fees 62,598 119,528 215,805
Loss from impairment of intangible assets - - 247,325
Other selling, general and administrative 27,965 54,392 106,042
------------------ ----------------- ----------------
TOTAL EXPENSES 110,655 312,328 937,380
------------------ ----------------- ----------------
NET LOSS (110,655) (312,328) (937,380)
OTHER COMPREHENSIVE INCOME/(LOSS)
Foreign currency translation gains/(losses) (9,251) (20,705) (21,055)
------------------ ----------------- ----------------
COMPREHENSIVE LOSS $ (119,906) $ (333,033) $ (958,435)
================== ================= ================
Net loss per common share - basic and diluted $ (0.02) $ (0.06) $ (0.19)
================== ================= ================
Weighted average number of common shares outstanding - basic
and diluted 5,150,000 5,150,000 5,060,072
================== ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Nine Cumulative From
Months Ended Months Ended March 24, 1999
September 30, September 30, (Inception) to
2000 2000 September 30, 2000
--------------- ----------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (110,655) $ (312,328) $ (937,380)
Adjustments to reconcile net loss to net cash used in operating
Depreciation and amortization 808 2,425 31,778
Loss on impaired assets -- -- 247,325
(Increase) decrease in:
Attorney's escrow -- -- (1,631)
Accounts receivable -- -- (420)
Increase (decrease) in:
Accounts payable 42,647 54,474 116,361
--------------- --------------- -------------
Net cash used in operating activities (67,200) (255,429) (543,967)
--------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on potential investment -- -- (15,000)
Purchase of property and equipment -- -- (43,765)
--------------- --------------- --------------
Net cash used in investing activities -- -- (58,765)
--------------- --------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Obligations under capital leases (14,473) (20,178) 15,408
Proceeds from issuance of common stock -- 50,000 598,868
Due to related party 435 (14,512) (4,544)
Proceeds from convertible debt -- 50,000 50,000
Proceeds from line of credit and related party loans 77,980 192,180 177,980
Payment of notes payable -- -- (230,997)
--------------- --------------- --------------
Net cash provided by financing activities 63,942 257,490 606,715
--------------- --------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 5,843 (3,131) 6,637
--------------- --------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,585 (1,070) 10,620
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 8,035 11,690 --
--------------- --------------- --------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 10,620 $ 10,620 $ 10,620
=============== =============== ==============
Cash paid during the period for:
Interest $ -- $ -- $ 964
================= ================= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles and the rules and regulations of the Securities and
Exchange Commission for interim financial information.
Accordingly, they do not include all the information necessary
for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however that all material
adjustments (consisting of normal recurring adjustments) have
been made which are necessary for a fair financial statements
presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the
year.
For further information, refer to the financial statements and
footnotes included in the Company's Form 10-KSB for the year
ended December 31, 1999.
NOTE 2 LOANS PAYABLE - LINE OF CREDIT
In April 2000, the Company entered into a line of credit
agreement with a related party stockholder. Under the terms of
the agreement the related party will provide the Company with
up to $200,000 in operating funds, to be repaid by the third
anniversary of the draw down of such funds. The loan bears no
interest and in lieu thereof, the lender shall be issued
100,000 warrants to acquire 100,000 shares of the Company's
stock at $2.00 per share. Additionally, the agreement provides
that the lender may elect to convert said loan into shares of
the Company's stock at $1.00 per share. At June 30, 2000, the
Company had borrowed $177,980 against this line of credit
which is shown as a loan payable.
NOTE 3 CONVERTIBLE LOAN
On March 23, 2000, the Company received a loan from a company
in the amount of $50,000. The loan is repayable by March 23,
2003 and is convertible into shares of the Company's common
stock at $1.50 per share. In lieu of interest the Company
granted 50,000 warrants convertible at the rate of one warrant
per one share of common stock at a price of $1.75 per share.
NOTE 4 COMMITMENTS AND CONTINGENCIES
During April 2000, the Company entered into a share purchase
agreement with a finance and investment company. The agreement
stipulates that an interest free open line of credit for up to
$10,000,000 will be established for the Company in exchange
for an option to purchase 35% of the then issued and
outstanding stock of the Company. The option will be granted
upon the date of the receipt of the funds. The option price is
set at $2.85 per share and expires 90 days following the
repayment of the credit provided. The line of credit has not
been established through the date of this report.
5
<PAGE>
NOTE 5 GOING CONCERN
As reflected in the accompanying financial statements, the
Company has accumulated losses of since inception and a
working capital deficiency of. The ability of the Company to
continue as a going concern is dependent on the Company's
ability to raise additional funds and implement its business
plan. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue
as a going concern.
Management's plans include obtaining an open line of credit up
to $10,000,000 in exchange for an option to purchase shares
(See Note 4).
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Torbay Holdings is a development stage company created to act as a
holding company for late-stage developmental, or early-stage commercial,
companies with opportunities in niche markets. Torbay Holdings currently owns
one subsidiary, Designer Appliances Ltd., and is actively seeking additional
acquisitions. However, no such acquisitions will be completed until Torbay
Holdings raises additional capital sufficient to finance the operations of newly
acquired subsidiaries.
Through Designer Appliances, Torbay Holdings has developed and intends
to market household appliances designed to be attractive to a premium, upscale
market. Management believes that they have identified an underexploited
opportunity in the premium-priced market for household and domestic appliances,
featuring attractively designed exteriors. There is no assurance that Torbay
Holdings will be able to successfully manufacture or market these items.
In addition to its acquisition strategy, Torbay Holdings will own and
manage hotel properties in a variety of locations. Torbay Holdings believes that
the asset value of these properties will underpin the value of Torbay Holdings'
equity investments in its subsidiaries and that the income from these properties
will provide revenue and funding of both property and subsidiary activities.
RESULTS AND PLAN OF OPERATIONS
Torbay Holdings has had insignificant sales and revenue. Since
inception, Torbay Holdings and its subsidiary Designer Appliances have focused
on organizational activities and research and development of Torbay Holdings'
products and marketing strategies. Management estimates that it will require
approximately $1,000,000 for the calendar year 2000 and a total capitalization
of $1,400,000 over the next two years for Designer Appliances to commence
manufacturing and marketing operations. The acquisition of additional
subsidiaries would also require additional capital.
Torbay Holdings' ability to develop its operations is dependent upon
its receiving additional capital financing. Torbay Holdings may raise capital by
the sale of its equity securities, through an offering of debt securities, or
from borrowing from a financial institution. During April 2000, Torbay Holdings
entered into a share purchase agreement with Douglaston Investments Limited, a
finance and investment company. The agreement stipulates that an interest free
open line of credit for up to $10,000,000 will be established for Torbay
Holdings in exchange for an option to purchase 35% of its then issued and
outstanding stock. Torbay Holdings believes that the line of credit will allow
it to meet its working capital needs for the next twelve months. The option will
be granted upon the date of the receipt of the funds. The option price is set at
$2.85 per share and expires 90 days following the repayment of the credit
provided.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Torbay Holdings, including its subsidiary Designer Appliances, has
incurred start-up costs, including administrative costs and research and
development costs. To date, Torbay Holdings has received funds from sales of its
securities and from loans to pay its operating costs.
To date, Torbay Holdings has received funds from the sale of its
securities and from loans. It has primarily used the proceeds from the sale of
securities of Designer Appliances (prior to becoming a subsidiary) for payment
of operating costs. Since inception, Torbay Holdings has received an aggregate
of approximately $600,000 from the sale of its securities. Designer Appliances
issued a promissory note in an aggregate amount of $161,650 for the cost of
purchasing the intellectual property rights to its products, which has been
repaid in full by Torbay Holdings from subscription proceeds.
On March 23, 2000, Torbay Holdings received a loan from DJ Limited, a
principal shareholder of Torbay Holdings, in the amount of $50,000. The loan is
repayable by March 23, 2003 and is convertible into shares of Torbay Holdings'
common stock at $1.50 per share. In lieu of interest, Torbay Holdings granted
warrants to purchase 50,000 shares of common stock at a price of $1.75 per
share. The warrants expire on March 23, 2003.
Torbay Holdings incurred a loss of $119,906 and $333,033 from operating
activities for the three and nine months ended September 30, 2000, respectively
and has accumulated losses of $958,435 since inception.
The cash flow of Torbay Holdings from financing activities for the nine
months ended September 30, 2000 was primarily from proceeds from the line of
credit and related party loans, the payment of a subscription receivable from
the sale of securities during fiscal year 1999 and the convertible note with DJ
Limited.
The financial statements appearing elsewhere in this report have been
prepared assuming that Torbay Holdings will continue as a going concern. Torbay
Holdings' ability to continue its operations is dependent upon its receipt of
revenues through sales of its products or through raising capital through debt
or equity financing or borrowings.
We believe that the $10,000,000 open line of credit will be sufficient
to pay our currently anticipated expenses including payment of salaries, rent
and payments to professionals and to continue our developmental and marketing
operations for the next 12 months. If additional funds are required, Torbay
Holdings will endeavor to sell additional securities. If sufficient additional
funding is not acquired, alternative sources developed, or revenues from sales
not received, we would be required to curtail our operations and there would be
substantial doubt about our ability to continue as a going concern.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
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 AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule*
(b) Reports on Form 8-K
None
*Submitted only with filing in electronic format.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, therunto duly
authorized.
TORBAY HOLDINGS, INC.
By: /s/ William Thomas Large
-----------------------------
William Thomas Large
President and Chief Executive Officer
(Principal Executive Officer and Principal Accounting Officer)
Date: November 14, 2000
10
