U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT NO. 1
TO
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File No.: 0-25417
TORBAY HOLDINGS, INC.
(Name of small business issuer 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)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK,
$.0001 PAR VALUE
(Title of Class)
Check whether the issuer (1) has 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 __
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
There were no revenues for the issuer's fiscal year ended December 31,
1999.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, as of a specified date within the last 60 days.
$0 (No trading market for the common stock currently exists).
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. Torbay Holdings, Inc had
5,150,000 shares outstanding as of March 31, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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TABLE OF CONTENTS
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PART I
ITEM 1. DESCRIPTION OF THE BUSINESS...........................................1
ITEM 2. DESCRIPTION OF PROPERTY...............................................4
ITEM 3. LEGAL PROCEEDINGS.....................................................4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................4
PART II
ITEM 5. MARKET FOR TORBAY HOLDINGS' COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS...........................................4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................5
ITEM 7. FINANCIAL STATEMENTS..................................................6
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE................................6
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS OF TORBAY HOLDINGS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT................................7
ITEM 10. EXECUTIVE COMPENSATION................................................8
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................................9
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................12
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
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PART I
ITEM 1. DESCRIPTION OF THE BUSINESS
GENERAL
Torbay Holdings is a development stage company created to act as a holding
company for late-stage developmental, or early-stage commercial, companies.
Torbay 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. Torbay Holdings acquired Designer Appliances,
Limited, a United Kingdom corporation which has developed and anticipates
marketing household appliances designed to be attractive to a premium, upscale
market, as a wholly-owned subsidiary on July 19, 1999.
On October 27, 1999, Torbay Acquisition Corporation, a reporting company
under the Securities Exchange Act of 1934, as amended, merged into Torbay
Holdings. Torbay Holdings became a successor issuer to Torbay Acquisition
Corporation pursuant to Rule 12g-3(a) of the General Rules and Regulations of
the Securities and Exchange Commission.
All references to "dollars," "U.S. dollars," "$," or "US$" are to United
States dollars, and all references to "pounds" or "(pound)" are to British
pounds sterling. As of December 31, 1999, the Interbank exchange rate was
(pound)0.6186 to $1.00, or $1.6165 to (pound)1.
BUSINESS AND ACQUISITION STRATEGY
Torbay Holdings plans to acquire late stage development or early stage
commercial activities, with opportunities in niche markets. Torbay Holdings will
issue convertible preferred stock, which will be converted to common stock upon
the attainment of a profit objective of a specified subsidiary or product line
within a given time frame, in exchange for the outstanding voting stock of the
subsidiary. In this way, value is not delivered to the incoming businesses until
such businesses reach specified profitability targets. Torbay Holdings expects
such profitability to be reflected in the share price of its common stock,
thereby limiting the dilution caused by its acquisitions.
Each subsidiary acquired will have the potential and opportunity to be
divested as a stand alone entity once the business has established itself as a
profitable entity, or if a suitable offer is received. Torbay Holdings will fund
each subsidiary with a loan secured by the intellectual property rights or other
assets of the subsidiary. The loan would be repaid at a rate 50% per annum, upon
completion of an initial public offering or sale of the subsidiary. In addition,
Torbay Holdings would hold 20% equity in the newly formed public entity.
Members of the board of directors of Torbay Holdings will be active
participants in the management and operation of its subsidiaries. Torbay
Holdings expects that significant direct involvement and the time allocation of
its directors will be required in the period immediately following the
acquisition of a subsidiary. Consequently, Torbay Holdings estimates that a
maximum of three or four start up subsidiaries will be manageable during the
first twelve months following their acquisition. However, as a subsidiary
becomes profitable this time demand on Torbay Holdings directors will diminish,
allowing them the opportunity to assume a similar role in newly other acquired
subsidiaries.
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.
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DESIGNER APPLIANCES, LTD.
OPERATIONS
Prior to the acquisition of the design by Designer Applicances, 300 units
of the Telstar I vacuum cleaner were produced for testing and marketing. See
"Products." Designer Appliances initially intends to subcontract manufacture of
the product components to the companies who manufactured the components for
these models and who are equipped and experienced to do so. Responsibility for
the final product assembly will be managed by Designer Appliances to ensure
product quality.
PRODUCTS
Telstar I Designer Vacuum Cleaner. The Telestar I Designer Vacuum Cleaner
is 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
allergens in dirt associated with asthma. It has a large (50ft.) cleaning radius
that typically allows cleaning an entire floor without stopping. Torbay Holdings
anticipates that the Telstar I will be built to British Electric Approval and
German TUV standards, which relate to electrical safety and manufacturing
practices. 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. When not in use, the vacuum cleaner
serves as a base for the glass tabletop and the entire unit appears as an
attractive and functional coffee table. This product is designed for an
environment where storage space is at a premium. Torbay Holdings may choose to
market this product under the name "Sputnik" or as the "Telstar Space Station".
The tabletop model has been developed as a working prototype and additional
expenditure, when available, is planned on testing, tooling and packaging. This
product is expected to sell for (pound)100 to (pound)125 above the cost of the
Telstar I vacuum cleaner.
Mistral I Desktop Fan. This is a desktop fan, cased in polished aluminum,
which utilizes a design similar to the Telstar I Vacuum Cleaner. The Mistral I
fan is partially developed and, development will be completed as finances
permit. This product is expected to sell for (pound)60-70 to stores and to
retail for (pound)100-125.
Designer Appliances has begun development of additional products, including
a toaster, a kettle, space heater and heated hearth screen. See "Trademarks"
herein.
MARKETING
Designer Appliances intends to operate directly in the United Kingdom with
its own sales team. Potential distributors have been identified to expand this
activity across Europe. 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 Designer
Appliances' 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
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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.
MAJOR COMPETITORS
Designer Appliances believes that there is no single major competitor in
the United Kingdom and Europe competing in the upscale small domestic appliance
sector. Designer Appliances is not aware of a competitor who manufactures and
sells a vacuum cleaner protected by a similar design. See "Trademarks" herein.
Designer Appliances is not aware of a competitor who sells a vacuum cleaner that
converts to a piece of furniture when it is not in use. The market for its other
anticipated products is diverse.
PATENTS AND TRADEMARKS
The British Patent Office has granted the following Design and Trademark
registrations made by Designer Appliances:
<TABLE>
<S> <C>
Telstar I vacuum cleaner design protection British design registration no. 2 066 378
The name "Telstar" British trademark registration no. 2 209 241
The name "Sputnik" British trademark registration no. 2 209 243
The tabletop design for the Telstar II, British design registration no. 2 082 459
Sputnik or Telstar Space Station
The combined vacuum and table product British trademark registration no. 2 085 669
The "Mistral" table top fan design British design registration no. 2 066 377
and trademark registration no. 2 209 473
Wurlitzer British trademark registration no. 2 209 244
</TABLE>
REAL ESTATE
In addition to its acquisition strategy, Torbay Holdings intends to 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.
EMPLOYEES
Torbay Holdings has two full-time employees and two part-time employees,
including its executive officers.
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ITEM 2. DESCRIPTION OF PROPERTY
OFFICES/PROPERTY
Torbay Holdings currently leases office space in the parish of Castel,
Guernsey, in the Channel Islands of Great Britain. Torbay Holdings has a
one-year lease expiring August 30, 2000, and the rent is (pound)5,200 per annum.
Currently, Designer Appliances has no facilities, but has identified a
manufacturing facility in South Manchester, United Kingdom, containing
approximately 2,500 - 5,000 square feet, which it anticipates to lease when it
has the financing to do so.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this Form 10-KSB, Torbay Holdings is not a party to any
litigation, and management has no knowledge of any threatened or pending
litigation against Torbay Holdings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR TORBAY HOLDINGS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
TRADING OF SHARES
There is currently no trading market for Torbay Holdings common stock.
However, Torbay Holdings expects that its common stock will be traded on the
over-the-counter market with quotations available through the OTC Electronic
Bulletin Board (OTC Bulletin Board). Equitrade Securities Corporation is
expected to make a market in the common stock by developing and maintaining
historical stock trading records, soliciting potential buyers and sellers and
attempting to match buy and sell orders. In connection with its market making
activities, Equitrade may buy or sell shares from time to time for its own
account. However, Equitrade will not be subject to any obligation with respect
to such efforts. If the common stock cannot be quoted and traded on the OTC
Bulletin Board, it is expected that the transactions in the common stock will be
reported in the pink sheets of the National Quotation Bureau, Inc.
RESALES OF THE SECURITIES UNDER STATE SECURITIES LAWS
The National Securities Market Improvement Act of 1996 ("NSMIA") limits the
authority of states to impose restrictions upon sales of securities made
pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file
reports under Sections 13 or 15(d) of the Securities Exchange Act. Sales of the
securities in the secondary market may be made pursuant to Section 4(1) of the
Securities Act (sales other than by an issuer, underwriter or broker). Torbay
Holdings expects that its stock will be listed for trading on the OTC Bulletin
Board and that Torbay Holdings shares will be eligible for resale in the
secondary market in each state.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PLAN OF OPERATION
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.
LIQUIDITY AND CAPITAL RESOURCES
Torbay Holdings, including its subsidiary Designer Appliances, has incurred
start-up costs, including administrative costs and research and development
costs. As of December 31, 1999, Torbay Holdings had not established a bank
account because it and its subsidiary, Designer Appliances, had focused on
organizational activities and research and development of Torbay Holdings'
products and marketing strategies and had not yet commenced operations as of
that date. In lieu of a bank account, costs and expenses had been disbursed on
behalf of Torbay Holdings through an attorney escrow account. As of December 31,
1999, the balance of the escrow account was $1,631 which represents the net of
$495,700 of funds received for common stock issuances, $150,000 of funds
disbursed for consulting, acquisition and registration costs, $12,669 of funds
disbursed for accounting fees and $331,400 transferred to Designer Appliances as
working capital used in conducting its operations. As of the date of this
report, the Company has opened bank accounts and is no longer utilizing the
attorney escrow account to collect or disburse funds on its behalf.
To date, Torbay Holdings has received funds from sales of its securities
and from loans. It has primarily used the proceeds from the sale of the
securities of Designer Appliances (prior to becoming a subsidiary) for payment
of operating costs to date. Since inception, Torbay Holdings has received an
aggregate of $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.
Torbay Holdings had a net loss of $377,727 from operating activities for
the period March 22, 1999 (inception) through December 31, 1999.
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The cash flow of Torbay Holdings from financing activities from inception
to December 31, 1999 was primarily from the receipt of proceeds from sales of
securities.
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.
ITEM 7. FINANCIAL STATEMENTS
The consolidated audited financial statements for the period March 24, 1999
(inception) to December 31, 1999 are included in pages F-1 through F-13 of this
Annual Report on Form 10-KSB. This includes the following financial statements:
Report of Independent Auditors
Consolidated Balance Sheets-- At December 31, 1999;
Consolidated Statements of Operations-- Year Ended December 31, 1999;
Consolidated Statements of Changes in Shareholders' Equity -- Year Ended
December 31, 1999;
Consolidated Statements of Cash Flows -- Year Ended December 31, 1999; and
Notes to Consolidated Financial Statements -- Year Ended December 31, 1999
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF TORBAY
HOLDINGS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to Torbay
Holdings' directors and executive officers as of March 31, 2000:
<TABLE>
<CAPTION>
NAME POSITION TERM EXPIRES
<S> <C> <C>
Francis Guy Lewis Askham Chairman and Director 2000
Colin Peter Gervaise-Brazier President, Chief Executive Officer and 2000
Director
Alexander Gordon Lane Secretary and Director 2000
William Thomas Large Vice President and Director 2000
</TABLE>
Torbay Holdings currently has four directors. All directors hold office
until the next annual meeting of stockholders and until their successors are
elected. Officers are elected to serve, subject to the discretion of the Board
of Directors, until their successors are appointed. Directors do not receive
cash compensation for their services to Torbay Holdings as directors, but are
reimbursed for expenses actually incurred in connection with attending meetings
of the Board of Directors.
Francis Guy Lewis Askham, 68, Chairman and a director of Torbay 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 Hustpierpoint 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.
Colin Peter Gervaise-Brazier, 56, President, Chief Executive Officer and a
director of Torbay 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 NASD Bulletin Board.
Alexander Gordon Lane, 58, Secretary and a director of Torbay 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
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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, 44, has been Vice President and a director of Torbay
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 of 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that Torbay Holdings' directors,
executive officers, and any person holding more than ten percent of Torbay
Holdings common stock, file with the SEC reports of ownership changes, and that
such individuals furnish Torbay Holdings with copies of the reports.
Torbay Holdings believes that none of its executive officers and directors
have complied with all Section 16(a) filing requirements applicable to them.
Torbay Holdings is working with its executive officers and directors to ensure
that each of them complies with his Section 16(a) filing obligations as soon as
possible.
ITEM 10. EXECUTIVE COMPENSATION
SALARY COMPENSATION
Mr. Askham currently receives no salary from Torbay Holdings. He will
receive a salary of(pound)12,000 per year. He earns no other remuneration from
Torbay Holdings or its subsidiary.
Mr. Gervaise-Brazier's salary is(pound)60,000 per year. He earns no other
remuneration from Torbay Holdings or its subsidiary.
Mr. Lane currently receives no salary from Torbay Holdings, but receives
$2,500 per month for out of pocket expenses associated with the use of his
offices as temporary office space for Torbay Holdings and for the use of an
automobile. Mr. Lane will receive a salary of $80,000 per year upon receipt of
the funds under Torbay Holdings' $10,000,000 line of credit with Douglaston
Investments.
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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The following table sets forth cash and noncash compensation for the fiscal
year ended December 31, 1999 awarded to or earned by Colin Peter
Gervaise-Brazier, President and Chief Executive Officer, and by William Thomas
Large, Vice President. No other officer's total annual salary and bonus for 1999
exceeded $100,000.
SUMMARY COMPENSATION TABLE
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<CAPTION>
ANNUAL COMPENSATION
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NAME AND PRINCIPAL ALL OTHER
POSITIONS YEAR SALARY($) BONUS($) COMPENSATION($)
------------------------------------ ------ --------- -------- ----------------
<S> <C> <C> <C> <C>
Colin Peter Gervaise-Brazier, 1999 96,990 -- --
President and Chief Executive
Officer
William Thomas Large, 1999 96,990 -(1) --
Vice President
</TABLE>
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(1) Mr. Large is eligible for a performance-related bonus of up to 100% of his
annual salary.
EMPLOYMENT AGREEMENTS
Torbay Holdings has not entered into any employment agreements with its
executive officers or other employees to date. Torbay Holdings may enter into
employment agreements with them in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS OF TORBAY HOLDINGS
The following table contains common stock ownership information for persons
known to Torbay Holdings to "beneficially own" 5% or more of Torbay Holdings
common stock as of March 31, 2000. In general, beneficial ownership includes
those shares that a person has the power to vote, sell, or otherwise dispose.
Beneficial ownership also includes that number of shares which an individual has
the right to acquire within 60 days (such as stock options) of the date this
table was prepared. Two or more persons may be considered the beneficial owner
of the same shares. We obtained the information provided in the following table
from filings with the SEC and with Torbay Holdings. In this Annual Report on
Form 10-KSB, "voting power" is the power to vote or direct the voting of shares,
and "investment power" includes the power to dispose or direct the disposition
of shares.
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<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT(1)
--------------------------- -------------------- -------
<S> <C> <C>
Armadillo Worldwide Limited
P.O. Box 313, Anson Court
La Route des Camps 500,000 9.71%
St. Martins
Guernsey, Channel Islands
INC Limited
c/o Trident Corporate Services (Bahamas) Limited
1st Floor, Kings Court
Bay Street 500,000 9.71%
P.O. Box N-3944
Nassau, Bahamas
Direct Trustees Limited
P.O. Box 307
Guernsey GY1 3SH 500,000 9.71%
United Kingdom
D.J. Limited
10 Queen Street
P.O. Box HM114 500,000(2) 9.71%
Hamilton HMEX
Bermuda
David G. Jones
10 Queen Street
P.O. Box HM 1154 750,000(2) 14.56%
Hamilton HMEX
Bermuda
Kevin W. Haddon-Harris
48 Par La Ville Road 770,000(2) 14.95%
Hamilton, Bermuda HM11
Martyn Paul Trebert
Pleinmont, Torteaval
Guernsey, Channel Islands GY8 0P 508,000 9.86%
United Kingdom
Colin Peter Gervaise-Brazier
President, Director
La Belle Epoque
Les Treacheries 525,000(3) 10.19%
L'Islet St. Sampsons
Guernsey, Channel Islands GY2 4SN
</TABLE>
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(1) Based upon 5,150,000 shares of common stock outstanding.
(2) 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.
(3) 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.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Torbay Holdings common
stock beneficially owned by each director, named executive officer and all
directors and named executive officers of Torbay Holdings as a group, as of
March 31, 2000. Except as otherwise indicated, each person and each group shown
in the table has sole voting and investment power with respect to the shares of
common stock listed next to their name.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
POSITION WITH OF BENEFICIAL COMMON STOCK
NAME AND ADDRESS TORBAY HOLDINGS OWNERSHIP OUTSTANDING (1)
--------------------------------- --------------------- -------------------- ---------------
<S> <C> <C> <C>
Francis Guy Lewis Askham
Spinney Corner Church Lane
Brashfield Chairman, Director 50,000(2) *
Romsey Harris 505OQH
United Kingdom
Colin Peter Gervaise-Brazier
La Belle Epoque
Les Treacheries President, Chief
L'Islet St. Sampsons Executive Officer, 525,000(3) 10.19%
Guernsey, Director
Channel Islands GY2 4SN
United Kingdom
Alexander Gordon Lane
4 Milford Place Secretary, Director 50,000 *
Hempstead, New York 11550
William Thomas Large
38 Chapel Lane
Bucklow Hill, Knutsford Vice President, 119,000(4) 2.03%
Cheshire WA16 6RH Director
United Kingdom
All Directors and Executive Officers as a 744,000(4) 12.72%
Group (4 persons)
</TABLE>
---------------------
* Less than one percent of the total outstanding shares of common stock.
(1) Based upon 5,150,000 shares outstanding as of March 31, 2000.
(2) Shares of common stock are directly owned by the individual.
(3) 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.
(4) Includes the common stock underlying Series 1 Convertible Preferred Stock
held in the amount of 107,000 shares individually by Mr. Large and 12,000
shares given by Mr. Large to his minor children. The amount stated assumes
conversion on a 1:1 ratio, and an outstanding capitalization of 5,850,000
common shares after conversion. Each share of Series 1 Convertible
Preferred Stock is convertible into ten shares of common stock of Torbay
Holdings at such time or times, if any, that the subsidiary of Torbay
Holdings, whose common shares were acquired in exchange for the Series 1
Convertible Preferred Stock, (Designer Appliances) has returned a net
profit to Torbay 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 Torbay Holdings.
11
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 Torbay Holdings. Mr. Large's consideration for
the assignment consisted of 20,000 shares of Series 1 Convertible Preferred
Stock of Torbay Holdings, valued at (pound)20,000, and (pound)50,000 in cash to
be paid within six months of the date thereof. At December 31, 1999, Designer
Appliances owed (pound)8,000 of the (pound)50,000 to Mr. Large. The terms of the
assignment were not the result of arms-length negotiations.
POSSIBLE CONFLICTS OF INTEREST
Certain members of Torbay Holdings' management are also in management
positions with other companies and currently devote less than their full time to
the business of Torbay Holdings. There can be no assurance that devotion of less
than their full time will not have an adverse effect on the business of Torbay
Holdings. In addition, certain members of management may experience conflicts of
interest with respect to allocation of business time among Torbay Holdings and
any other companies in which they hold management positions. See "Directors and
Executive Officers" herein.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are either filed as part of this
report or are incorporated herein by reference:
2.1 Agreement and Plan of Merger between Torbay Acquisition
Corporation and Torbay Holdings, Inc.(1)
3.1 Certificate of Incorporation of Torbay Holdings, Inc., as
amended(1)
3.2 By-Laws of Torbay Holdings, Inc.(1)
4.1 Certificate of Designation with respect to Series 1 Convertible
Preferred Stock of Torbay Holdings, Inc.(1)
4.2 Form of Common Stock Certificate(2)
10.1 Deed of Assignment of Intellectual Property Rights by W. Thomas
Large to Designer Appliances Ltd. dated June 10, 1999(3)
10.2 Agreement among Michael Beard, 3T Designs Ltd. and Designer
Appliances Ltd. dated June 12, 1999 with respect to registered
and unregistered design rights (2)
10.3 Share Purchase Agreement between Torbay Holdings, Inc. and
Douglaston Investments Limited (4)
21.1 Subsidiaries of Torbay Holdings, Inc.(3)
27.1 Financial Data Schedule. (Filed in electronic format only) (4)
----------------------
(1) Incorporated herein by reference in the Current Report on Form 8-K,
filed with the Securities and Exchange Commission on November 12,
1999.
12
<PAGE>
(2) Incorporated herein by reference in the Registration Statement on Form
SB-2 (Registration No. 333-93847), filed with the Securities and
Exchange Commission on December 30, 1999.
(3) Incorporated herein by reference in Amendment No. 1 to the Current
Report on Form 8-K/A, filed with the Securities and Exchange
Commission on January 10, 2000.
(4) Incorporated herein by reference in the initial filing of this Annual
Report on Form 10-KSB as filed with the Securities and Exchange
Commission on May 12, 2000.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 12, 1999. An Amended Current Report on Form 8-K/A
was also filed on January 10, 2000.
This Form 10-KSB 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 which
could cause actual results to differ materially from these estimates. These
factors include: changes in general, economic and market conditions, or the
development of an adverse interest rate environment that adversely affects the
interest rate spread or other income anticipated from Torbay Holdings'
operations and investments.
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TORBAY HOLDINGS, INC.
By: /s/ William Thomas Large
----------------------------------------
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/Francis Guy Lewis Askham Chairman of the Board and August 25, 2000
------------------------------------------ a Director
Francis Guy Lewis Askham
/s/ Colin Peter Gervaise-Brazier Director August 25, 2000
-----------------------------------------
Colin Peter Gervaise-Brazier
/s/Alexander Gordon Lane August 25, 2000
------------------------------------------ Secretary and a Director
Alexander Gordon Lane
/s/William Thomas Large President, Chief Executive Officer and a August 25, 2000
------------------------------------------ Director (principal executive officer and
William Thomas Large financial officer)
</TABLE>
14
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
CONTENTS
PAGE 2 INDEPENDENT AUDITORS' REPORT
PAGE 3 CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999
PAGE 4 CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER COMPREHENSIVE
LOSS FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER
31, 1999
PAGE 5 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR
THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
PAGE 6 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM MARCH
24, 1999 (INCEPTION) TO DECEMBER 31, 1999
PAGE 7-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31,
1999
F-1
<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 December 31, 1999 and
the related consolidated statements of operations and other comprehensive loss,
changes in stockholders' equity and cash flows for the period from March 24,
1999 (inception) to December 31, 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 December 31, 1999, and the
results of its operations and its cash flows for the period from March 24, 1999
(inception) to December 31, 1999, 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 9 to the
consolidated financial statements, the Company has accumulated losses of
$377,727 since inception and has a working capital deficiency of $20,340. These
factors raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning this matter are also described in Note 9.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
April 19, 2000
F-2
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 11,690
Due from attorney's escrow 1,631
Subscription receivable 51,500
Accounts receivable 441
------------------
Total current assets 65,262
------------------
PROPERTY AND EQUIPMENT - NET 42,598
------------------
OTHER ASSETS
Deposits 15,000
Intangible assets - net 247,325
------------------
Total other assets 262,325
------------------
TOTAL ASSETS $ 370,185
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 64,964
Due to related party 12,932
Obligations under capital lease 7,706
------------------
Total current liabilities 85,602
LONG-TERM LIABILITES
Obligations under capital leases 29,648
------------------
TOTAL LIABILITIES 115,250
------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value, 20,000,000 shares authorized,
700,000 Series 1 convertible shares issued and outstanding 70
Common stock, $.0001 par value, 100,000,000 shares authorized, 5,100,000
shares issued and outstanding 510
Additional paid-in capital 630,956
Accumulated deficit during development stage (377,727)
Accumulated other comprehensive income 1,126
------------------
TOTAL STOCKHOLDERS' EQUITY 254,935
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 370,185
==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
INCOME $ -
------------------------------
EXPENSES
Accounting fees 50,357
Consulting fees 198,978
Depreciation and Amortization 30,822
Legal and professional 45,920
Other selling, general and administrative 51,650
------------------------------
NET LOSS (377,727)
OTHER COMPREHENSIVE INCOME
Foreign currency translation gains 1,126
------------------------------
COMPREHENSIVE LOSS $ (376,601)
==============================
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.08)
==============================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD - BASIC AND DILUTED 4,972,872
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated Accumulated
Additional During Other
Preferred Stock Common Stock Paid-in Development Comprehensive
Shares Amount Shares Amount Capital Stage Income Total
------ ------ ------- ------ ------- --------- ---------- -------
<S> <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 and subscriptions -- -- 4,850,000 485 599,515 -- -- 600,000
Issuance of common stock in
connection with merger -- -- 250,000 25 343 -- -- 368
Foreign currency translation gain -- -- -- -- -- -- 1,126 1,126
Net loss for the period from
March 24, 1999 (inception) to
December 31, 1999 -- -- -- -- -- (377,727) -- (377,727)
---------- -------- ---------- ------- ---------- ---------- --------- --------
BALANCE,
DECEMBER 31, 1999 700,000 $ 70 5,100,000 $ 510 $ 630,956 $ (377,727) $ 1,126 $254,935
========== ======== ========== ======== ========== ========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (377,727)
Adjustments to reconcile net loss to net cash used in operating
Depreciation and amortization 30,822
(Increase) decrease in:
Attorney's escrow (1,631)
Accounts receivable (441)
Increase (decrease) in:
Accounts payable 64,963
-----------------------
-----------------------
Net cash used in operating activities (284,014)
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on potential investment (15,000)
Purchase of property and equipment (45,939)
-----------------------
Net cash used in investing activities (60,939)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Obligations under capital leases 37,354
Proceeds from issuance of common stock 548,868
Due to related party (69,055)
Due to creditors (161,650)
-----------------------
Net cash provided by financing activities 355,517
-----------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,126
-----------------------
INCREASE IN CASH AND CASH EQUIVALENTS 11,690
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -
-----------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 11,690
=======================
Cash paid during the period for:
Interest $ 964
=======================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In June 1999, DAL purchased all interests relating to the registered and
unregistered design rights of certain products from an individual. DAL issued a
promissory note for $161,650 in exchange for the rights (See paragraph one of
Note 5). The note was paid in its entirety prior to December 31, 1999.
On June 10, 1999, DAL purchased intellectual property rights from a related
party. DAL issued 20,000 shares of its common stock valued at $31,168 and a note
payable in the amount of $81,987 (See paragraph two of Note 5). The Company has
paid $69,055 on the note through December 31, 1999.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND BUSINESS OPERATIONS
Torbay Holdings, Inc. (a development stage company) ("THI") 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.
In July 1999, THI effected an Agreement and Plan of Reorganization
whereby THI acquired all of the issued and outstanding securities of
Designer Appliances Limited ("DAL"), a United Kingdom Corporation, in
exchange for an aggregate of 700,000 shares of the Company's Series 1
Convertible Preferred Stock (See Note 8 (A)). As a result of the
agreement, DAL became a wholly owned subsidiary of the Company. DAL has
developed and intends to market household appliances designed to be
attractive to a premium, upscale market.
THI and DAL are herein referred to as (the "Company").
On October 26, 1999, the Company entered into and consummated a merger
agreement whereby the Company acquired all of the outstanding shares of
common stock of Torbay Acquisition Corp. ("TAC") in exchange for
250,000 shares of its common stock. The acquisition was accounted for
using the purchase method of accounting. At the time of the merger TAC
was an inactive Delaware shell corporation and a reporting company
under the Securities Exchange Act of 1934, as amended. 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.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned active subsidiary DAL. All
significant intercompany transactions and balances have been eliminated
in consolidation.
(C) BASIS OF PRESENTATION
The financial statements are prepared in accordance with Generally
Accepted Accounting Principles in the United States of America. The
basis of accounting differs from that used in the United Kingdom
statutory financial statements of DAL. Adjustments are made to
translate the statutory financial statements of DAL to United States
Generally Accepted Accounting Principles. The financial statements are
expressed in United States dollars. The functional currency of DAL is
the British pound sterling (See Note 1 (J)).
(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 disclosures 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.
F-7
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
(E) CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
(F) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
expense as incurred. Depreciation for office equipment is provided
using a declining balance method over the estimated useful lives of the
assets of four years. Depreciation for motor vehicles is provided using
the straight-line method over the estimated useful lives of the assets
of four years.
(G) INTANGIBLES
Intangible assets include interests relating to registered and
unregistered design rights for certain products acquired from
individuals. The intangible assets are being amortized over a ten-year
period using the straight-line method.
(H) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting
Standard Board Statement 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.
(I) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued several
new accounting pronouncements. Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by Statement
No. 137, establishes accounting and reporting standards for derivative
instruments and related contracts and hedging activities. This
statement is effective for all fiscal quarters and fiscal years
beginning after June 15, 2000. The Company believes that its adoption
of these pronouncements will not have a material effect on the
Company's financial position or results of operations.
(J) FOREIGN CURRENCY TRANSLATION
The functional currency of DAL is British pound sterling. Financial
statements for this entity are translated into United States dollars at
year-end exchange rates as to assets and liabilities and weighted
average exchange rates as to revenues and expenses. Capital accounts
are translated at their historical exchange rates when the capital
transactions occurred (See Note 1(K)).
F-8
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
(K) COMPREHENSIVE INCOME
The Company accounts for Comprehensive Income under the Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("Statement No. 130").
Statement No. 130 establishes standards for reporting and display of
comprehensive income and its components, and is effective for fiscal
years beginning after December 15, 1997.
The foreign currency translation gains (See Note 1(J)) resulting from
the translation of the financial statements of DAL, expressed in
British pound sterling, to United States dollars are reported as Other
Comprehensive Income in the Statement of Operations and as Accumulated
Other Comprehensive Income in Stockholders' Equity and in the Statement
of Changes in Stockholders' Equity.
(L) LOSS PER SHARE
Basic and diluted loss per common share for the period ended December
31, 1999 is computed based on the weighted average common shares
outstanding during the year as defined by Statement of Financial
Accounting Standards, No. 128, "Earnings Per Share". The assumed
exercise of common stock equivalents was not utilized since the effect
was anti-dilutive. At December 31, 1999, there were 700,000 preferred
shares which were convertible to a maximum of 7,000,000 common shares
that could potentially dilute future earnings per share (See Note 8
(A)).
NOTE 2 - DUE FROM ATTORNEY'S ESCROW
THI has yet to establish a bank account. The Company's attorney has
been collecting and disbursing funds on behalf of the Company via an
escrow account. As of December 31, 1999, the balance of the escrow
account was $1,631 which represents the net of $495,700 of funds
received for common stock issuances (See Note 8 (B)), $150,000 of funds
disbursed for acquisition and registration costs, $12,669 of funds
disbursed for accounting fees and $331,400 transferred to its
subsidiary, DAL.
NOTE 3 - STOCK SUBSCRIPTION RECEIVABLE
On July 23, 1999, the Company issued 4,850,000 common shared to
individuals. The Company has received $548,500 ($495,700 through the
attorney's escrow and $52,800 indirectly) towards this issuance and the
remaining $51,500 is shown as a stock subscription receivable. This
amount has been classified as a current asset, instead of a reduction
of equity, since the funds were received in January 2000, prior to the
issuance of the accompanying consolidated financial statements.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 consists of the following:
Office equipment $ 2,294
Motor vehicles 3,637
Motor vehicles under capital lease 40,008
---------------------
45,939
Less Accumulated depreciation 3,341
---------------------
$ 42,598
=====================
Depreciation expense for the period ended December 31, 1999 was $3,341.
F-9
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
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
products. The total purchase price paid was $161,650, represented by a
promissory note issued to the seller by DAL and acquired by the Company
in the acquisition discussed in Note 1(A). The note was paid in its
entirety prior to December 31, 1999 and the rights have been assigned
to the Company.
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 $113,155, which represented
the original cost basis to the related party. DAL issued 20,000 shares
of its common stock valued at $31,168 based on the par value, since no
other basis for valuation existed, and a note payable in the amount of
$81,987 to the seller (See Note 6). Pursuant to the acquisition
discussed in Note 1(A), the Company acquired the note payable and
issued preferred stock in exchange for the $31,168 of common stock (See
Note 8 (A)).
The cost of the above design rights and intellectual property rights
are being amortized over a five-year period. Amortization expense for
the period ended December 31, 1999 was $27,481.
NOTE 6 - NOTES PAYABLE
The Company acquired an agreement and the related note payable of
$81,987 (See paragraph two of Note 5). The Company has repaid $69,055
of this note and owes $12,932 as of December 31, 1999.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
(A) CAPITAL LEASE AGREEMENTS
The Company leases a vehicle under a capital lease. The agreement
stipulates monthly installment payments for a 36-month period
commencing in September 1999 with the last payment including a balloon
payment. The ownership of the car will transfer to the Company at the
end of the lease.
Future minimum principal lease payments under capital leases are as
follows at December 31:
2000 $ 7,706
2001 9,362
2002 20,286
--------------------------
37,354
Less current portion 7,706
--------------------------
$ 29,648
==========================
(B) OPERATING LEASE AGREEMENTS
The Company leases a vehicle under an operating lease. This lease has a
remaining term expiring in September 2002. The Company's subsidiary
leases office space under a month-to-month operating lease that can be
curtailed given thirty days notice.
F-10
<PAGE>
TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
Future minimum lease payments under operating leases are as follows at
December 31:
2000 $ 10,931
2001 10,931
2002 8,048
--------------------------
$ 29,910
==========================
NOTE 8 - STOCKHOLDERS' DEFICIENCY
(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 the
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 1(A) 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 December 31,
1999, the Company had received funds of $548,500 towards the stock
issuance. The remaining proceeds to be received are classified as a
current stock subscription receivable asset of $51,500 (See Note 3). On
October 26, 1999, the Company issued 250,000 shares of its common stock
to TPG Capital Corporation in connection with the merger with Torbay
Acquisition Corp. (See Note 1(A)).
NOTE 9 - GOING CONCERN
As reflected in the accompanying financial statements, the Company had
a net loss of $377,727 and a working capital deficiency of $20,340. 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
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TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
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 10).
NOTE 10 - SUBSEQUENT EVENTS
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.
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