U.S. Securities and Exchange Commission
Washington, D.C. 20549
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, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number:0-32893
CAL-BAYINTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 26-0021800
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1562 Parkway Loop, Suite A, Tustin, CA 92780
(Address of principal executive offices)
(714) 258-7070
(Issuer’s telephone number)
1582 Parkway Loop, Suite G, Tustin, CA 92780
(Former address, 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under plan confirmed by a court. Yes ____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
The aggregate number of shares issued and outstanding of the issuer’s common stock as of September 30, 2004 was 32,669,031 shares of $0.001 par value.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
PART I.
FINANCIAL INFORMATION
PAGE NO.
Item 1.
Financial Statements
3-6
Consolidated Balance Sheets as of
September 30, 2004 and 2003
3
Comparative Consolidated Statements of Operations
for the Three Months Ended September 30, 2004 and 2003 and
for the Nine Months Ended September 30, 2004 and 2003
4
Consolidated Statement of Changes in
Stockholders’ Equity for the Period Ended
September 30, 2004
5
Comparative Consolidated Statements of Cash Flows
for the Three Months Ended September 30, 2004 and 2003 and
6
for the Nine Months Ended September 30, 2004 and 2003
Notes to the Consolidated Financial
Statements
7-17
Item 2.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
18-25
Item 3.
Controls and Procedures
25
PART II.
OTHER INFORMATION
Item 2.
Changes in Securities and Use of Proceeds
25
Item 6.
Exhibits and Reports on Form 8-K
26
(a)
Exhibits
(b)
Reports on Form 8-K
Signatures
26
Item 1. Financial Statements
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
CONSOLIDATED BALANCE SHEETS (unaudited)
September 30,
ASSETS
2004
2003
Current Assets:
Cash (Note 1c)
$ 36,361
$ 6,512
Prepaid Expenses
-0-
2,175
TOTAL CURRENT ASSETS
36,361
8,687
Office Furniture and Equipment, at cost,
net of accumulated depreciation of
$14,267 and $9,973 respectively (Notes 1h & 2)
11,914
15,540
Other Assets:
Related Party Receivable (Note 1f)
-0-
21,500
Deposit (Note 1g)
2,770
2,770
TOTAL OTHER ASSETS
2,770
24,270
TOTAL ASSETS
$ 51,045
$ 48,497
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable & Accrued Expenses (Note 1i)
$ 56,119
$ 37,996
Loan from Related Party (Note 1f)
10,207
-0-
Current Portion of Capital Lease Obligation (Note 9)
2,838
1,232
TOTAL CURRENT LIABILITIES
69,164
39,228
Capital Lease Obligation, net of Current Portion (Note 9)
7,139
11,718
TOTAL LIABILITIES
76,303
50,946
Commitments and Contingencies (Note 10)
- - -
- - -
Stockholders’ Equity:
Common Stock, $.001 par value; 75,000,000 shares
authorized; shares issued and outstanding
32,669,031 and 30,493,360 (Notes 1b, 1k, 3 & 5)
32,669
30,493
Additional Paid in Capital
1,270,383
1,204,653
Retained Deficit
(1,328,310)
(1,237,595)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
(25,258)
(2,449)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 51,045
$ 48,497
See notes to consolidated financial statements.
CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the Three Months Ended September 30, 2004 & 2003 and
For the Nine Months Ended September 30, 2004 & 2003
Three Months Ended
Nine Months Ended
September 30
September 30
2004
2003
2004
2003
Revenues
Sales
$ 737
$ 43,935
$ 2,294
$ 43,935
Commission Income
110,395
17,953
148,602
56,178
Total Revenues
111,132
61,888
150,896
100,113
Cost of Sales
Purchases
550
36,808
1,712
36,808
Commission Expenses
-0-
-0-
-0-
-0-
Total Cost of Sales
550
36,808
1,712
36,808
Gross profit
110,582
25,080
149,184
63,305
Operating expenses
69,463
239,952
169,468
563,296
Net (loss)
$ 41,119
$ (214,872)
$ (20,284)
$ (499,991)
Net (loss)
Per share:
Basic & Diluted
0.00
(0.01)
(0.00)
(0.02)
Weighted average
Shares outstanding:
Basic & Diluted
32,669,031
26,203,765
31,919,031
25,353,687
See notes to consolidated financial statements.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
For the Period Ended September 30, 2004
Additional
Paid-in
Common Stock
Capital
Total
Number of ($0.001 Par)
(Discount
Retained
Stockholders’
Shares
$ Amount
on Stock)
Deficit
Equity
Balance at inception
(February 22, 2001)
17,112,000
$ 17,112
$ (7,738)
$ -0-
$ 9,374
Recapitalization for Reverse
Acquisition on March 8, 2001
4,278,000
4,278
4,125
---
8,403
Net (Loss) December 31, 2001
---
---
---
(23,838)
(23,838)
Balance at December 31, 2001
21,390,000
21,390
(3,613)
(23,838)
(6,061)
Issuance of Common
Stock for Services
2,320,000
2,320
784,080
---
786,400
Net (Loss) December 31, 2002
---
---
---
(713,766)
(713,766)
Balance at December 31, 2002
23,710,000
23,710
780,467
(737,604)
66,573
Issuance of Common
Stock for Services
7,409,031
7,409
452,466
---
459,875
Private sale of Common Stock
50,000
50
1,450
---
1,500
Net (Loss) December 31, 2003
---
---
---
(570,422)
(570,422)
Balance at December 31, 2003
31,169,031
31,169
1,234,383
(1,308,026)
(42,474)
Issuance of Common
Stock for Services
1,500,000
1,500
36,000
---
37,500
Net (Loss) September 30, 2004
---
---
---
(20,284)
(20,284)
Balance at September 30, 2004
32,669,031
$
32,669
$ 1,270,383
$(1,328,310)
$ (25,258)
See notes to consolidated financial statements
CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months Ended September 30, 2004 & 2003 and
For the Nine Months Ended September 30, 2004 & 2003
Three Months Ended
Nine Months Ended
September 30
September 30
2004
2003
2004
2003
Cash flows from
Operating activities:
Net (loss)
$ 41,119
$ (214,872)
$ (20,284)
$ (499,991)
Adjustments to reconcile net
Income (loss) to net cash
Provided by operating activities
Depreciation
1,006
1,276
3,018
3,764
Stock based professional &
Consulting expenses
-0-
212,719
37,500
429,469
Increase (decrease)
To current assets &
Current liabilities
(10,184)
4,492
2,861
37,292
Total adjustments
(9,178)
218,487
43,379
470,525
Net cash provided (used) by
Operating activities
31,941
3,615
23,095
(29,466)
Cash flows from
Investing activities:
Purchase of fixed asset
-0-
-0-
-0-
(945)
Net cash (used) by
Investing activities
-0-
-0-
-0-
(945)
Cash flows from
Financing activities:
Stock issuance for cash
-0-
1,500
-0-
1,500
Payment of capital lease
(885)
(397)
(1,741)
(1,550)
Net cash provided (used) by
Financing activities
(885)
1,103
(1,741)
(50)
Net increase (decrease)
In Cash
31,056
4,718
21,354
(30,461)
Cash & equivalents,
Beginning of period
5,305
1,794
15,007
36,973
Cash & equivalents,
End of period
$ 36,361
$ 6,512
$ 36,361
$ 6,512
Supplemental cash flow information:
Cash paid for interest
$ -0-
$ -0-
$ -0-
$ -0-
Cash paid for taxes
$ 2,400
$ 1,600
$ 2,400
$ 1,600
Supplemental disclosure of non-cash activities:
In January of 2003, the Company issued 1,275,000 shares of common stock as consideration for certain professional and consulting expenses. In July and September of 2003, the Company issued 5,458,356 shares of common stock as consideration for certain professional and consulting expenses. In March of 2004, the Company issued 1,500,000 shares of common stock as consideration for certain professional and consulting expenses.
See notes to consolidated financial statements.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies
(a)
Nature of Business
Cal-Bay International, Inc. and subsidiaries ("The Company"), was originally organized as Var-Jazz Entertainment, Inc., under the laws of the State of Nevada, on December 8, 1998. On March 8, 2001, Var-Jazz Entertainment, Inc. acquired 100% of the outstanding common shares of Cal-Bay Controls, Inc., which has been accounted for as a reverse acquisition. Subsequent to this acquisition, Var-Jazz Entertainment, Inc. changed its name to Cal-Bay International, Inc. The Company does not currently have any international operations but expects to in the future. See also Note 3.
Cal-Bay Controls, Inc. (CBC) was originally a sole proprietorship, being operated since 1990 under the name Cal-Bay Controls, in Tustin, California, by its owner Robert Thompson. CBC, which represents the only operating entity of the Company, is a manufacturer’s representative and distribution firm, serving California, Nevada and Hawaii in process, environmental, safety and laboratory markets. On February 22, 2001, CBC was incorporated under the name Cal-Bay Controls, Inc.
CBC supplies analytical products, services and associated equipment through license distribution agreements, and receives compensation for its selling efforts in the form of commissions, typically 10-20% of the net sales price, on all sales of products within the specified sales territory.
On August 17, 2003, the Company formed a Nevada corporation, Cal-Bay Analytical, Inc., (CBA) a wholly owned subsidiary. As of September 30, 2004, this subsidiary started to generate business transactions, which have been consolidated on the Company’s financial statements.
(b)
Capitalization
Var-Jazz Entertainment, Inc. was initially capitalized in December, 1998 by the issuance of 1,500,000 shares of its common stock, at $0.004 per share, totaling $6,000. In June, 1999 the Company circulated a self written confidential offering memorandum, resulting in the issuance of an additional 2,778,000 common shares, for a total of $46,300, less offering costs of $8,415.
On March 8, 2001, Cal-Bay International, Inc. (formerly Var-Jazz Entertainment, Inc.) acquired all of the issued and outstanding common stock of CBC in exchange for 17,112,000 shares of its common stock. The shares issued in the acquisition resulted in the owners of CBC having operating control of Cal-Bay International, Inc. immediately following the acquisition. Therefore, for financial reporting purposes, CBC is deemed to have acquired Cal-Bay International, Inc. in a reverse acquisition accompanied by a recapitalization.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies (Continued)
(b)
Capitalization (continued)
The surviving entity reflects the assets and liabilities of Cal-Bay International, Inc. and CBC at their historical book values and the historical operations of the Company are those of CBC. The issued common stock is that of Cal-Bay International, Inc. and the retained earnings is that of CBC.
Immediately subsequent to this acquisition, the Company increased its authorized common stock from 25,000,000 to 75,000,000 and initiated a forward 3 for 1 stock split, resulting in 21,390,000 total outstanding common shares. See also Note 3.
On August 29, 2002, the Company filed a Form S-8 Registration Statement with the Securities and Exchange Commission and issued 2,240,000 common shares in payment for professional and consulting services. On November 15, 2002, the Company issued 80,000 common shares in payment for professional services.
On January 9, 2003, the Company filed a Form S-8 Registration Statement with the Securities and Exchange Commission and issued 1,275,000 common shares in payment for professional and consulting services.
On May 7, July 9 and September 11, 2003, the Company issued 3,684,031 restricted common shares in payment for consulting services.
Also on September 9, 2003, the Company filed a Form S-8 Registration Statement with the Securities and Exchange Commission and issued 2,450,000 common shares in payment for professional and consulting services.
In March of 2004, the Company filed a Form S-8 Registration Statement with the Securities and Exchange Commission and issued 1,500,000 unrestricted common shares in payment for consulting services.
(c)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. There were no cash equivalents as of September 30, 2004.
(d) Principles of Consolidation and Basis of Accounting
The accompanying consolidated financial statements include the accounts of Cal-Bay International, Inc. and of its wholly owned subsidiaries, CBC and CBA. All material inter-company transactions and accounts have been eliminated in consolidation.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies (Continued)
(e)
Revenue Recognition
The Company recognizes commission income in accordance with SAB 101 – Topic 13.A.3. The nature of each of CBC’s manufacturer’s representation agreements requires that the products be shipped from the manufacturer to the customer, and that either a significant period of time elapse thereafter or that the manufacturer must receive payment from the customer before payments are ultimately made to CBC for orders submitted. The determination as to exactly when the terms specified in the sales arrangements are substantially completed or fulfilled by the manufacturer and have been accepted by the customer and the ultimate collectibility of the commission can only be reasonably assured when the payments are ultimately received by the Company. Commission expenses earned by outside sales representatives are recorded as cost of sales when the commission income that it is related to is recognized; however, there has been no commission expenses incurred or deferred as of the date of these financial statements.
The Company recognizes sales revenue in the Systems and New Products divisions on the date of delivery of goods to the customer in accordance with SAB 101.
(f)
Related Party Transactions / Receivables / Payables
The balance of related party receivables at September 30, 2003 was with the CEO, was interest free and due and payable as of September 30, 2003. The balance of related party payables at September 30, 2004 is interest free with the CEO (see also Note 10).
(g)
Deposits
This balance consists of a security deposit on the Company’s leased premises.
(h)
Property and Equipment and Organizational Expenditures
Office furniture and equipment is stated at cost and is depreciated using the straight line method over their estimated useful lives, currently five years. Organizational expenditures for the Company were paid as completed and have been expensed as incurred in accordance with SOP 98-5. Betterments and improvements are capitalized and depreciated over their estimated useful lives, while repairs and maintenance costs are expensed when incurred.
(i)
Accounts Payable an Accrued Expenses
The balance consists primarily of unpaid operating expenditures and contractual obligations due currently.
(j)
Income Taxes
The Company has applied the Financial Accounting Standards Board Statement 109,Accounting for Income Taxes(SFAS 109), to all operations since inception, for all periods disclosed in this financial examination, and all other disclosures of information for periods prior to acquisitions of the operating subsidiary, CBC.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies (Continued)
(j)
Income Taxes (Continued)
SFAS 109 "Accounting for Income Taxes" requires the liability method in accounting for income taxes. Deferred tax assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount on the financial statements. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted laws.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable, respectively, for the period, plus or minus the change during the period, in deferred tax assets and liabilities. The Company, exclusive of the operations of its wholly owned subsidiaries, has experienced operating losses during its period of existence. These losses occurred in a business activity unrelated to that of CBC and the Company does not have any current plans to re-enter that market. Future profitability of current and unrelated business activities cannot be assured, resulting in the recordation of reserves for the valuation allowance of the entire amount of the determined deferred tax assets (See also Note 6).
(k)
Transactions in Capital Stock
All securities issued by the Company and its subsidiaries have not been registered under the Securities Act of 1933, as amended. They may not be sold, offered for sale, transferred, pledged or hypothecated, in the absence of a registration statement in effect with respect to the securities under such act, or an opinion of counsel or other evidence satisfactory to the Company that such registration is not required, or unless sold pursuant to Rule 144 under such act. The Company's free trading stock is currently involved in limited trading on the Over the Counter Bulletin Board under the symbol CBYI. The trading price at September 30, 2004, was $0.02. See also Notes 3 and 5.
(l) Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 specifies the computation, presentation, and disclosure requirements of earnings per share and supersedes Accounting Principles Board Opinion 15, "Earnings Per Share". SFAS 128 requires dual presentation of basic and, where applicable, diluted earnings per share. Basic earnings per share, which excludes the impact of common stock equivalents, replaces primary earnings per share. Diluted earnings per share which utilizes the average market price per share or ending market price per share when applying the treasury stock method in determining common stock equivalents, replaces fully diluted earnings per share.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies (Continued)
(l) Earnings Per Share (Continued)
SFAS 128 is effective for the Company in all years since inception. However, there were no common stock equivalents during the any of these periods and, therefore, there is no effect on the earnings per share presented for any of these periods, due to the Company's adoption of SFAS 128. Basic earnings per share have been computed using the weighted average number of common shares outstanding.
(m) Recently Issued Accounting Pronouncements
In April 2002, the (“FASB”) issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 updates, clarifies, and simplifies existing accounting pronouncements. This statement rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB No. 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS No. 44 has been rescinded, as it is no longer necessary. SFAS no. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transacti ons be accounted for in the same manner as sale-lease transactions.
This statement also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. The Company does not expect adoption of SFAS No. 145 to have a material impact, if any, on its financial position or results of operations.
In June 2002, the (“FASB”) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF Issue 94-3, a liability for an exit cost, as defined, was recognized at the date of an entity’s commitment to an exit plan. The provisions of this statement are effective for exit or disposal activities that are initiat ed after December 31, 2002 with earlier application encouraged. The Company does not expect adoption of SFAS No. 146 to have a material impact, if any, on its financial position or results of operations.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies (Continued)
(m) Recently Issued Accounting Pronouncements – (continued)
SFAS No. 147, issued in October 2002 regarding the acquisition of certain financial institutions does not apply to the Company.
In December 2002, the (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” This statement amends FASB Statement No. 123, “Accounting for Stock-Based Compensation” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company does not expect adoption of SFAS No. 148 to have a material impact, if any, on its financial position or results of operations.
In April 2003, the (“FASB”) issued SFAS No. 149, “Accounting for Derivative Instruments and Hedging Activities”. This statement amends FASB Statement No. 133 to improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. This statement is effective for contracts entered into or modified after June 30, 2003. The changes due to this statement will result in more consistent reporting of contracts as either derivatives or hybrid instruments. The Company does not expect adoption of SFAS No. 149 to have a material impact, if any, on its financial position or results of operations.
In May 2003, the (“FASB”) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The changes in this statement will result in a more complete depiction of an entity’s liabilities and equity. The changes will also enhance the relevance of accounting information by providing more information about the entity’s obligations to transfer assets or issue shares. The Company does not expect adoption of SFAS No. 150 to have a material impact, if any, on its financial position or results of operations.
As a nonaccelerated filer, the Company plans to comply with Section 404 of the Sarbanes-Oxley Act and file their first internal control report by July 15, 2005.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(1)
Summary of Significant Accounting Policies (Continued)
(n)
Basis of Presentation
The Company’s financial statements have been prepared on a going concern basis, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. However, there is substantial doubt about the Company’s ability to continue as a going concern because of its losses and its net deficit as of September 30, 2004. The Company’s continued existence is dependent upon its ability to generate more profitable business activities from its customers. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities, or any other adjustment that might be necessary should the Company be unable to continue as a going concern. The outcome of this uncertainty cannot be determined at this time.
(2)
Office Furniture and Equipment
A summary of property and equipment is as follows as of September 30,:
2004
2003
Office Furniture &
Computer Equipment
$
26,181
$
25,513
Less: Accumulated Depreciation
(14,267)
(9,973)
Net Furniture and Equipment
$
11,914
$
15,540
(3)
Acquisition of Cal-Bay Controls, Inc.
As previously discussed in Note 1b, Cal-Bay International, Inc. (formerly Var-Jazz Entertainment, Inc.) acquired all of the issued and outstanding common stock of CBC in exchange for 17,112,000 shares of its common stock. The transaction has been accounted for as a reverse acquisition, in accordance with the terms of Accounting Principles Board Opinion No. 16, paragraph 70 and SAB Topic 2A. Since Cal-Bay International, Inc. was a non-operating public shell company with minimal assets, the transaction has been treated as a capital transaction in substance, with no goodwill or intangible being recorded, and no pro forma financial information being presented.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(3)
Acquisition of Cal-Bay Controls, Inc. – (continued)
The following is a summary of the financial position of the Cal-Bay International, Inc. (CBYI), CBA and CBC, without the consolidating and eliminating adjustments at:
September 30, 2004
CBYI
CBA
CBC
Combined
Current assets
$
2,967
$
1,940
$
31,455
$
36,361
Property and equipment, net
-0-
-0-
11,914
11,914
Other assets
-0-
-0-
2,770
2,770
$
2,967
$
1,940
$
46,139
$
51,045
Current liabilities
$
-0-
$
1,482
$
67,682
$
69,164
Long term liability
-0-
-0-
7,139
7,139
Stockholders’ equity
2,967
458
(28,682)
(25,258)
$
2,967
$
1,940
$
46,139
$
51,045
September 30, 2003
CBYI
CBA
CBC
Combined
Current assets
$
-0-
$
-0-
$
8,687
$
8,687
Property and equipment, net
-0-
-0-
15,540
15,540
Other assets
-0-
-0-
24,270
24,270
$
-0-
$
-0-
$
48,497
$
48,497
Current liabilities
$
-0-
$
-0-
$
39,228
$
39,228
Long term liability
-0-
-0-
11,718
11,718
Stockholders’ equity
-0-
-0-
(2,449)
(2,449)
$
-0-
$
-0-
$
48,497
$
48,497
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(4)
Significant Customers/Suppliers
Majority of CBC’s commission income is derived from five unrelated manufacturing companies that it represents. The commission income from these five significant customers was $147,700 and $38,634, respectively, for the nine months ended September 30, 2004 and 2003 (see also Note 7).
(5)
Certain Beneficial Owners and Management
The following is a list of the officers and directors of the Company, along with all other shareholders owning over 1 million shares of the Company's shares as of:
September 30, 2004
Shareholder/Position/Title
Shares Held
Ownership
Robert Thompson – President & CEO
10,580,053
32.4
%
Charles Prebay – Vice President & CFO
1,575,000
4.8
Linwood C. Meehan III
2,000,000
6.1
Dante Panella
1,050,000
3.2
Cede & Co. - Investor
14,345,660
43.9
All Other Investors
3,118,318
9.6
Total shares issued & outstanding
32,669,031
100.0
%
September 30, 2003
Shareholder/Position/Title
Shares Held
Ownership
Robert Thompson – President & CEO
11,059,653
36.3
%
Charles Prebay – Vice President & CFO
1,608,400
5.3
Linwood C. Meehan III
2,000,000
6.6
Cede & Co. - Investor
7,868,650
25.8
All Other Investors
7,956,653
26.0
Total shares issued & outstanding
30,493,356
100.0
%
(6)
Income Taxes
As of September 30, 2004, the Company had provided taxes on consolidated income for Federal and State income taxes, estimated at $2,400.
At September 30, 2004 deferred taxes consisted of a net tax assets (benefits) of approximately $607,545, due to operating loss carryforwards of the Company totaling $1,360,036 which were fully offset by equal valuation allowances since there is no assurance of recovery. The net operating loss carryforwards will expire beginning in 2013.
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(7)
Off Balance Sheet Risk
The Company could be affected by the inability to establish a market for their shares of stock. Additionally, since the date of incorporation, the short-term sales revenue for the Company has come primarily from two principal accounts, which is due to the fact that the markets for the products from these accounts have been very active recently. Over the long-term, management expects the markets for these products and accounts to diversify. Also, these principals are not the only suppliers for these products and management has other sources for identical products if it becomes necessary to find other suppliers.
(8)
Equity Line of Credit
In April 2003, the Company entered into an equity line of credit investment agreement with Dutchess Private Equities Fund, L.P. (Dutchess). Under this equity line of credit, the Company may periodically sell shares of common stock to Duchess to raise capital. The Company agreed to register 10,675,675 shares of common stock to undertake this equity line of credit and issued 675,675 shares to Dutchess as consulting fees. As of the date of this report, the Company has decided to postpone and withdraw the registration.
(9)
Leases
The Company lease certain office equipment that is accounted for as a capital lease and capitalized using interest rates appropriate at the inception of the lease.
The future minimum commitments under this lease arrangement at September 30, 2004 are as follows:
Period Ended September 30,
2005
$
2,838
2006
3,135
2007
3,464
2008
540
Thereafter
-0-
Net minimum commitments
9,977
Less current portion
2,838
Long-term commitments
$
7,139
CAL-BAY INTERNATIONAL, INC.
And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(10)
Commitments and Contingencies
CBC leases an office/warehouse facility in Tustin, California from Robert Thompson (see Note 5) on a month to month basis for $3,000.00 per month.
The Company was not involved in any litigation as of the date of this examination.
(11)
Subsequent Events
On October 29, 2004, the Company filed an S-8 registration statement for the issuance of 4,000,000 shares of common stock as compensation for consulting services to a third party.
Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation
Forward-Looking Statement Notice
When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed under the “Item 2. &nbs p;Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.
Business Description
General
The Company originally incorporated in the State of Nevada on December 9, 1998, under the name Var-Jazz Entertainment, Inc. Var-Jazz was organized to engage in the business of music production and sales. Var-Jazz did not succeed in the music business and the board of directors determined it was in the best interest of the Company to seek additional business opportunities. On March 8, 2001, Var-Jazz entered into an Agreement and Plan of Reorganization with Cal-Bay Controls, Inc. whereby Var-Jazz changed its name to Cal-Bay International, Inc., and acquired Cal-Bay Controls, Inc. as a wholly owned subsidiary in exchange for 17,112,000 shares of common stock.
Cal-Bay Controls, Inc. originally formed in 1976 as a sole proprietorship that was acquired by Robert J. Thompson in 1990. On February 22, 2001, Cal-Bay Controls incorporated in the State of Nevada and was subsequently acquired by Var-Jazz on March 8, 2001.
On March 7, 2002, Cal-Bay International’s Form 10-SB registration statement went effective and in June of 2002, Cal-Bay International, Inc. moved from the Pink Sheets to the Over the Counter Bulletin Board where the Company currently trades under the symbol CBYI.
Cal-Bay Analytical, Inc. was incorporated on August 7, 2003 in the State of Nevada and is also operated as a wholly owned subsidiary.
Our Business
Cal-Bay International’s operating subsidiaries are Cal-Bay Controls (CBC) and Cal-Bay Analytical (CBA). Both CBC and CBA operate as manufacturer’s sales representatives and distributors of analytical products, services and associated equipment through license and distribution agreements. CBC primarily serves the process, environmental and safety markets, while CBA primarily serves the laboratory markets. Cal-Bay does not currently have any international operations and does not intend to pursue an international market at this time, but expects to do so in the future.
Cal-Bay Controls (CBC)
CBC is composed of three divisions, the Representative/Distribution Division, the Systems Division and the New Products Division. CBC’s operations are focused mainly in California and Nevada with a small percentage of sales made elsewhere in the United States.
Representative/Distribution Division
CBC’s Representative and Distribution Division currently serves markets in California, Nevada and Hawaii. Cal-Bay represents and/or distributes products from many manufacturers of engineered products for the process control, environmental and safety markets. The process control market involves instrumentation and equipment used to help manufacturing plants control or improve the operations of specific production or manufacturing processes within the plant. The environmental market uses instrumentation and equipment to measure or help reduce air and/or water pollution produced by industrial, utility or municipal facilities. The safety market requires instrumentation for use in various industries to meet personnel safety requirements typically imposed by OSHA regulations.
CBC has a signed contract/agreement with each of the companies it represents which grants CBC the rights to sell the assigned products/services within a defined sales territory (typically California, Nevada and Hawaii). In most cases these contracts are exclusive in the sense that no other sales representative is allowed to sell the products covered by the contract in the same sales area, however, there are a few contracts which are non-exclusive in the sense that there may be more than one authorized sales agents in a given sales area. CBC receives compensation for selling efforts in the form of commissions (typically 10-20% of the net sales price) on all sales of products within the specified sales territory.
Within the designated sales territory, CBC serves the following markets:
* Environmental market
* Industrial Process Markets
* Petroleum Refineries
* Chemical plants
* Pharmaceutical and Biotechnology
* Computer related
* Paint and coating
* Printing
* Metal processing
* Bulk industrial gases and specialty gases
* Semiconductor
* Aerospace
* Plastics/Polymers
* Original Equipment Manufactures (OEM’s)
The environmental market is typically driven by local, state and national regulations promulgated by regulatory agencies, including: the South Coast Air Quality Management District (SCAQMD), California Air Resources Board (CARB) and the U.S. Environmental Protection Agency (EPA), which has both air and water protection departments.
During the 1980’s and 1990’s there were many new regulations, on the local and federal level, which required the installation of new analytical instrumentation and monitoring systems for both air and water pollution control. CBC has been very successful in selling analyzers for use in the environmental markets and we believe the market will continue to be strong in this area. During the late 1990’s the number of new regulations declined, however, CBC expects new regulations to be implemented in several areas in the coming decade, which should result in an increase in this market in the near future.
The safety market is also regulatory driven, usually by OSHA rules. CBC anticipates the safety market to remain fairly static in the near future.
The EPA and OSHA frequently implement new regulations seeking to improve quality, safety and the environment. When new regulations are implemented, industry is required to comply with the regulations, often necessitating the purchase of new equipment and controls. While CBC cannot
assure new regulations translate directly to additional sales, it is management’s experience that increased regulations typically result in an increase in sales.
Process and quality control markets are much less likely to be affected by regulatory concerns, however, these markets are more likely to be affected by changes in the economy. Sales to these markets are typically not regulatory driven but are driven by the need for improved production efficiency, reductions in cost, improvement in product quality, etc. New technology developments are often the driving force behind sales of new equipment into these markets as each company searches for a competitive advantage.
Systems Division
In addition to selling products and services as a representative/distributor, CBC produces a small number of operational systems that integrate a variety of products and components from numerous vendors. Notably, CBC is able to provide Continuous Emissions Monitoring Systems (“CEMS”) to selected clients for regulatory compliance. These clients typically have unique requirements that cannot be addressed by one of the larger CEM integration companies. On CEMS projects, CBC will often act as the prime contractor with several sub-contractors who will be responsible for design, manufacture, test and/or installation and certification to meet the regulatory requirements. A typical CEM system will include sample probe, heated sample line, sample conditioning system to remove moisture and particulates, sample flow controller and distribution manifold, analyzer(s) for the gas species to be measured, a micro-processor based system controller, data-logger and/or data acquisition and reporting system, and calibration gases. Services may include installation supervision, start-up and training, certification to meet regulatory standards, maintenance contracts and regulatory permitting assistance.
The market for CEMS is entirely driven by local, state and national regulations promulgated by regulatory agencies, including the South Coast Air Quality Management District, California Air Resources Board and the U.S. Environmental Protection Agency.
The Company is interested in expanding its core business into new areas of business opportunity. Some potential methods of accomplishing this goal are to expand into new markets with existing products, develop and manufacture new products for sale into our existing markets and search for acquisition candidates.
New Products Division
CBC is currently exploring several opportunities to develop new products and/or technologies, as follows:
Spectra Unlimited – Product Acquisition/Development
During the first quarter of 2003 Cal-Bay reached an agreement to acquire the technology rights to several products developed by Spectra Unlimited, a recently dissolved company. Cal-Bay had been in negotiations with the owners of this technology during the past year, and a letter of intent had been signed in late-2002. After completion of the due diligence process, a contractual agreement for Cal-Bay to acquire the rights to the technology developed by Spectra Unlimited was reached and signed by all parties.
The Spectra products include the following:
·
Streaming Current Analyzer – this analyzer uses the proven thermoconductivity principle of analysis and is unique in that it can discriminate a single component of interest from a complex mixture of different components.
Potential applications include: measurement of solids in a binary solution, selective measurement of a single gas in a complex mixture of gases for purity or quality control, various solvent ratios for process control, product quality measurements, etc.
·
Infrared Spectrometer – This is a highly sensitive NDIR spectrometer designed for gas measurements in environmental or process control applications. It uses dual measurement channels and an energy-balancing circuit that allows the use of the same optical filters for sample and reference wavelengths.
·
Catalytic Scrubbers - A series of proprietary non-depleting catalytic scrubbers that can turn most active substances inert to improve sampling and analysis in difficult applications.
It is currently unknown what the market potential of these products are, or the amount of additional research and product development that will be required before taking these products to market, however Cal-Bay believes that each of these products can be developed with a fairly limited amount of resources and that these products will fit very well into our existing areas of business. If the R&D of these products is successful it is anticipated that these products will be manufactured and sold either by a new subsidiary company to be established or by a company to be acquired by Cal-Bay that already has a manufacturing capability and sales organization.
Pattern Recognition Technology – Product Development
During the past several years Cal-Bay has evaluated several new types of analytical products using “pattern recognition technology”. Pattern recognition is the art of separating and identifying complex chemical or electronic signatures from even more complex backgrounds.
Initially, Cal-Bay worked with an inventor who had developed a prototype pattern recognition device using neural net processing. Based upon limited marketing research, this new device had tremendous potential for use in a number of areas, but the inventor was unable or unwilling to perform the product development required to produce a commercially viable new product. Cal-Bay was unable to finalize a business relationship with the inventor, and as a result we began evaluating other products capable of performing similar measurements. One of these other products and/or technologies which was evaluated by Cal-Bay was a new type of chemical sensor developed by a major university. Cal-Bay was approached by the technology transfer agent for this university to consider the possible further development and commercialization of this new sensor technology. After reviewing the technology, and performing initial market research studies and preparing cost estimates for the commercialization of this product, Cal-Bay determined that the development costs and time to market were not within our preferred guidelines and therefore we decided not to pursue this opportunity.
Cal-Bay has also recently had discussions with another company that has developed an “electronic nose” analytical device using fast gas chromatography with a new proprietary detector. It is possible that Cal-Bay may become an investor in this company, and/or may become a sales agent for the product.
Analytical Sensors – Product Development
Cal-Bay has had preliminary discussions with the former owner of an analytical sensor company regarding the potential development of a new line of sensors. Unfortunately, these discussions have not progressed and are currently on hold. It is possible that these discussions will continue in the future, but there are currently no plans or schedule for this to occur.
Future Product R&D
In addition to the pattern recognition technology that Cal-Bay plans to develop, we will continually be searching for other new technology ideas that we may develop internally, partner with or acquire in the future.
One resource that Cal-Bay will utilize to aid in the search for new technologies is the services of “technology brokers” that specialize in identifying new technology and matching that technology with companies that are looking for new products to develop. Cal-Bay has recently used such a service to evaluate a new technology patented by the faculty of a public U.S. university that had reached the “proof of concept” stage and needed additional funding and resources to complete the development into a commercially-viable product.
Each year there are many thousands of new patent applications filed, including many by universities or by small, private inventors who do not have the resources or facilities or inclination to complete the development of their new idea into a commercial product. Of these new patents, many are in areas of interest to Cal-Bay, including new sensor technology, new analytical methodologies, and new processes for environmental measurement and remediation. Cal-Bay will review new patents in these areas, and will select appropriate new technologies to target for possible acquisition for future development.
Cal-Bay Analytical (CBA)
CBA operates as a manufacturer’s sales representative and distributor of analytical products, services and associated equipment through license and distribution agreements.
CBA primarily serves the laboratory markets. The laboratory markets include a variety of industrial, governmental and private contract testing laboratories as well as research and development laboratories operated by private industries, universities and governmental research laboratories.
CBA has a signed contract/agreement with each of the companies it represents which grants CBA the rights to sell the assigned products/services within a defined sales territory (typically California, Nevada, Arizona, Utah and Hawaii). In most cases these contracts are exclusive in the sense that no other sales representative is allowed to sell the products covered by the contract in the same sales area, however, there are a few contracts which are non-exclusive in the sense that there may be more than one authorized sales agents in a given sales area. CBA receives compensation for selling efforts in the form of commissions (typically 10-20% of the net sales price) on all sales of products within the specified sales territory.
Future Potential Mergers & Acquisitions and/or New Subsidiary Companies to be Formed by Cal-Bay International
The Company has identified a number of companies that would be good candidates for future mergers and/or acquisitions and we are actively searching for new candidates in order to determine the best growth strategy for the future. Each of these companies has been selected based upon such criteria as profitability, existing management team, ownership desire for exit strategy, synergy and compatibility with Cal-Bay’s goals and plans. At this time, Cal-Bay’s management is evaluating each of the candidates currently identified and we have begun negotiations with one company. It is anticipated that if these negotiations continue and are successful, Cal-Bay will sign a letter of intent in the future with this company. After reaching agreement on a letter of intent, Cal-Bay will perform the necessary due diligence before continuing. Assuming that the due diligence is completed without identify ing any potential concerns or liabilities, Cal-Bay will then enter into a contractual agreement to merge with and/or acquire this company. Cal-Bay plans to issue periodic press releases announcing the progress of this or any other possible acquisition in order to keep our shareholders and the investing public informed.
Alternatively, the Company may decide to form a new subsidiary company or companies n the future as it either develops new products or identifies new areas of business opportunity.
Three Month periods Ended September 30, 2004 and 2003
The following Cal-Bay International business summary is from the consolidated results of the Cal-Bay Controls and Cal-Bay Analytical operating subsidiaries.
Cal-Bay generated $110,395 in commission income, and $737 in product sales, for total revenues of $111,132 for the three-month period ended September 30, 2004, with cost of sales of $550 for a gross profit of $110,582. These revenues compare with $17,953 in commission income and $43,935 in product sales for total revenues of $61,888 for the three-month period ended September 30, 2003, with cost of sales of $36,808 and gross profit of $25,080. Revenues for the three-month period ended September 30, 2004 were $49,244 more than the same period ended in 2003. Gross profit for the three-month period ended September 30, 2004 was $85,502 more than the same period ended in 2003. The net cash provided by operating activities for the three months ended September 30, 2004 was $31,941 compared to net cash provided of $3,615 from the comparable period in 2003, which is an increase in the net cash provided by operating a ctivities of $28,326.
Operating expenses were $69,463 for the three-month period ended September 30, 2004 compared with operating expenses of $239,952 for the three-month period ended September 30, 2003, which is a decrease of $170,489. The net gain in income was $41,119 for the three-month period ended September 30, 2004 compared to a loss of ($214,872) for the same period ended in 2003, which is an increase in net income of $255,991.
Nine Month periods Ended September 30, 2004 and 2003
The following Cal-Bay International business summary is from the consolidated results of the Cal-Bay Controls and Cal-Bay Analytical operating subsidiaries.
Cal-Bay generated $148,602 in commission income, and $2,294 in product sales, for total revenues of $150,896 for the nine-month period ended September 30, 2004, with cost of sales of $1,712 for a gross profit of $149,184. These revenues compare with $56,178 in commission income and $43,935 in product sales for total revenues of $100,113 for the nine-month period ended September 30, 2003, with cost of sales of $36,808 and gross profit of $63,305. Revenues for the nine-month period ended September 30, 2004 was $50,783 more than the same period ended in 2003. Gross profit for the nine-month period ended September 30, 2004 was $85,879 higher than the same period ended in 2003. The net cash provided by operating activities for the nine months ended September 30, 2004 was $23,095 compared to net cash used of ($29,466) from the comparable period in 2003, which is an increase in the net cash provided from operating activities of $52,561.
Operating expenses were $169,468 for the nine-month period ended September 30, 2004 compared with operating expenses of $563,296 for the nine-month period ended September 30, 2003, which is a decrease of $393,828. The net gain (loss) in income was ($20,284) for the nine-month period ended September 30, 2004 compared to a net loss of ($499,991) for the same period ended in 2003, which is an increase in net income of $479,707.
Liquidity and Capital Resources
As of September 30, 2004, Cal-Bay had total assets of $51,045 including $36,361 in cash on hand and office furniture and equipment of $11,914 net of accumulated depreciation. Current liabilities totaled $69,164 and include $56,119 in accounts payable and accrued expenses, $10,207 in related party payables and $2,838 in the current portion of a capital lease of office equipment.
Cal-Bay filed an SB-2 Registration Statement on December 24, 2003 regarding an equity line of credit with Dutchess Private Equities Fund, L.P. and subsequently withdrew the filing. Cal-Bay had previously reported that it was in the process of re-negotiating the terms of its Equity Line of Credit with Dutchess Private Equities Fund, L.P. and that the Company anticipated filing a new SB-2 Registration Statement upon conclusion of the negotiations. Management has since decided to postpone the filing of a new Registration Statement.
Cal-Bay does not anticipate any substantial new capital expenditures for the next twelve months nor does Cal-Bay plan to increase the overhead expense level in any way. The lease on Cal-Bay’s former headquarters office facility expired in August 2004 and was extended by one month through the end of September 2004. Cal-Bay moved to a new office location at the end of September 2004. Cal-Bay entered into a lease at the new location on a month-to-month basis instead of entering into a longer term commitment at the present time. This will give Cal-Bay flexibility to look for a less expensive office facility, to consider consolidation of it’s office space requirements, or to investigate sub-leasing or sharing office facilities with another company in the future in order to reduce overhead expenses. Cal-Bay plans to continue the current operations of all subsidiaries with the present managem ent structure, financial and operational goals for the near term. Based upon the sales, expense and income results from the first three quarters of operations and our projections for the remainder of the year, the Company believes that it can maintain the current level of operations for the rest of the year without having to raise additional funds for operational purposes. The company believes that its cash needs to maintain current operations can be met with cash on hand and revenues from accounts receivable on orders for at least the next twelve months. However, should the Company require additional capital, the Company may sell additional stock, arrange debt financing or seek other avenues of raising capital.
Item 3. Controls and Procedures
(a)
Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.
(b)
(b) Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 2. Changes in Securities and Use of Proceeds
On January 9, 2003 we issued 1,275,000 common shares to four individuals for professional and consulting services. The services were not connected to any fund raising activities. At the time of issuance, the common stock was valued at $216,750. The shares were registered on Form S-8 as filed with the Securities and Exchange Commission.
On September 2, 2003 we filed a registration statement on Form S-8 dated August 29, 2003 reporting the issuance of 2,450,000 shares valued at $73,500. The shares were issued to two individuals for ongoing consulting and legal services unrelated to fund raising activities.
In July and September of 2003, we issued a total of 3,008,356 restricted common shares of Cal-Bay to three unrelated individuals for ongoing consulting services. The shares were issued in a private transaction without registration in reliance of the exemption provided by Section 4(2) of the Securities Act. The investors had access to all material information pertaining to Cal-Bay and its financial condition. The investors also completed and signed investment agreements attesting to their sophistication or accredited investor status and investment intent. No broker was involved and no commissions were paid on the transactions.
On July 29, 2003, we sold 50,000 shares Cal-Bay common stock to an accredited investor for $1,500. The shares were issued in a private transaction without registration in reliance of the exemption provided by Section 4(2) of the Securities Act. The investor had access to all material information pertaining to Cal-Bay and its financial condition. The investor completed and signed a statement attesting to his sophistication or accredited investor status and investment intent. No broker was involved and no commissions were paid on the transaction.
On February 12, 2004 we filed a registration statement on Form S-8 reporting the issuance of 1,500,000 shares valued at $37,500. The shares were issued to two individuals for ongoing consulting and investor relations services unrelated to fund raising activities.
Item 6. Exhibits and Reports on Form 8-K.
Reports on Form 8-K:
Cal-Bay did not file any reports on Form 8-K during the 90 days ended September 30, 2004.
Exhibits:
Number | Title | Location |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Attached |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Attached |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Attached |
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CAL-BAY INTERNATIONAL, INC.
Date: November 10, 2004
By: /s/ Robert J. Thompson
Robert J. Thompson
Chief Executive Officer
Date: November 10, 2004
By:/s/ Charles A. Prebay
Charles A. Prebay
Chief Financial Officer
