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 March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from to
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
(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 MAY 1, 2000
----- -----------
Common Stock, par value $.01 5,150,000
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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TORBAY HOLDINGS, INC.
FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
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PAGE
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements............................................................................1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................................6
Part II - OTHER INFORMATION
Item 1. Legal Proceedings...............................................................................8
Item 2. Changes in Securities and Use of Proceeds.......................................................8
Item 3. Defaults Upon Senior Securities.................................................................8
Item 4. Submission of Matters to a Vote of Security Holders.............................................8
Item 5. Other Information...............................................................................8
Item 6. Exhibits and Reports on Form 8-K................................................................8
Signatures........................................................................................................9
</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 March 31, 1999 which
could cause actual results to differ materially from these estimates.
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ii
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TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 INDEPENDENT ACCOUNTANTS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 AND
DECEMBER 31, 1999
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE
LOSS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND FOR THE
PERIOD FROM MARCH 24, 1999 (INCEPTION) TO MARCH 31, 2000
PAGE 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND FOR THE PERIOD FROM MARCH 24, 1999
(INCEPTION) TO MARCH 31, 2000
PAGE 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31,
2000
iii
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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 March 31, 2000 and the
related consolidated statements of operations and cash flows for the three
months then ended and for the period from March 24, 1999 (inception) to March
31, 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 3 to the
consolidated financial statements, the Company is a development stage company
that has accumulated losses since inception of $453,042 and has a working
capital deficiency of $43,946. 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
May 15, 2000
1
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TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000
December 31, 1999 (Unaudited)
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 11,690 $ 38,430
Due from attorney's escrow 1,631 1,631
Subscription receivable 51,500 1,500
Accounts receivable 441 436
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Total Current Assets 65,262 41,997
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PROPERTY AND EQUIPMENT - NET 42,598 42,055
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OTHER ASSETS
Deposits 15,000 15,000
Intangible assets - net 247,325 237,173
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Total Other Assets 262,325 252,173
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TOTAL ASSETS $ 370,185 $ 336,225
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LIABILITY AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 64,964 $ 64,136
Due to related parties 12,932 --
Loans payable -- 14,200
Obligations under capital lease 7,706 7,607
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Total current liabilities 85,602 85,943
LONG TERM LIABILITIES
Convertible loan payable -- 50,000
Obligations under capital leases 29,648 23,358
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TOTAL LIABILITIES 115,250 159,301
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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,
5,100,000 issued and outstanding 510 510
Additional paid-in capital 630,956 630,956
Accumulated deficit during development stage (377,727) (453,042)
Accumulated other comprehensive income (loss) 1,126 (1,570)
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TOTAL STOCKHOLDERS' EQUITY 254,935 176,924
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 370,185 $ 336,225
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE LOSS
UNAUDITED
<TABLE>
<CAPTION>
MARCH 24, 1999 FOR THE THREE
(INCEPTION) TO MONTHS ENDED
MARCH 31, 2000 MARCH 31, 2000
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<S> <C> <C>
INCOME $ -- $ --
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EXPENSES
Accounting fees 60,772 10,415
Consulting fees 227,248 28,270
Depreciation and Amortization 37,822 7,000
Legal and professional 64,400 18,480
Other selling, general and administrative 62,800 11,150
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NET LOSS (453,042) (75,315)
OTHER COMPREHENSIVE INCOME/(LOSS)
Foreign currency translation gains/(losses) (1,570) (1,220)
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COMPREHENSIVE LOSS $ (454,612) $ (76,535)
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NET LOSS PER SHARE - BASIC AND DILUTED $ (0.27) $ (0.02)
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WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD -
BASIC AND DILUTED $ 1,689,008 $ 5,100,000
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</TABLE>
See accompanying notes to consolidated financial statements.
3
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TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
MARCH 24, 1999 FOR THE THREE
(INCEPTION) TO MONTHS ENDED
MARCH 31, 2000 MARCH 31, 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(453,042) (75,315)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 37,822 7,000
(Increase) decrease in:
Attorney's escrow (1,631) --
Accounts receivable (439) --
Increase (decrease) in:
Accounts payable 64,552 --
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Net cash used in operating activities (352,738) (68,315)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on potential investment (15,000) --
Purchase of property and equipment (45,648) --
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Net cash used in investing activities (60,648) --
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CASH FLOWS FROM FINANCING ACTIVITIES:
Obligations under capital leases 31,167 (5,951)
Proceeds from issuance of common stock 598,868 50,000
Due to related party (2,016) (13,049)
Proceeds from convertible debt 50,000 50,000
Proceeds from loans 14,200 14,200
Payment of notes payable (240,939) --
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Net cash provided by financing activities 451,280 95,200
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 536 (145)
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INCREASE IN CASH AND CASH EQUIVALENTS 38,430 26,740
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -- 11,690
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 38,430 $ 38,430
========= ========
Cash paid during the period for:
Interest $ 964 $ --
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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TORBAY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 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.
In addition, the accompanying financial statements do not include the
statement of operations or cash flows for the three months ended March
31, 1999 since the Company was inactive during this period.
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 - 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 3 - GOING CONCERN
As reflected in the accompanying financial statements, the Company has
accumulated losses of $453,042 since inception and a working capital
deficiency of $43,946. 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).
NOTE 4 - 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. The line of credit has not been
established through the date of this report.
5
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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.
6
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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.
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.
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 $75,315 from operating activities
for the three months ended March 31, 2000 and has accumulated losses of $453,042
since inception.
The cash flow of Torbay Holdings from financing activities for the
three months ended March 31, 2000 was primarily from 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.
7
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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.
8
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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.
/s/William Thomas Large Vice President and a May 19, 2000
- --------------------------- Director (principal financial
William Thomas Large officer)
9
