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, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number: 0-32893
CAL BAY INTERNATIONAL, 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)
2111 Palomar Airport Road, Suite 100, Carlsbad, CA 92009
(Address of principal executive offices)
(760) 930-0100
(Issuer's telephone number)
(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 [ ]
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, 2006 was: 41,235,548 shares at $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, 2006 and 2005 3
Comparative Consolidated Statements of Operations
for the Three Months Ended September 30, 2006 and 2005 and
for the Nine Months Ended September 30, 2006 and 2005 4
Comparative Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2006 and 2005 5
Notes to the Consolidated Financial
Statements 6-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-19
Item 3. Controls and Procedures 19
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 19
Item 6. Exhibits and Reports on Form 8-K 20
(a) Exhibits
(b) Reports on Form 8-K
Signatures 20
2
ITEM 1. FINANCIAL STATEMENTS
CAL-BAY INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
September 30, 2006
ASSETS
2006 2005
------------ ------------
Current Assets:
Cash (Note 1c). . . . . . . . . . . . . . . . . . . . . $ (218,764) $ 201,471
Cash-COBS . . . . . . . . . . . . . . . . . . . . . 151,556 0
Accounts Receivable . . . . . . . . . . . . . . . . . . 321,766 0
Accounts Receivable (Stonewall Note-Note 3) . . . . . . 14,997,390 7,800,000
Prepaid Expenses . . . . . . . . . . . . . . . . . . . 4,250 0
Loan to Aspen Cove Resort Property (Note 1f). . . . . . 94,385 0
Short Term Receivable (Note 7) . . . . . . . . . . . 0 50,000
Escrowed Funds for Real Estate Purchase (Note 3)
North Hollywood Property. . . . . . . . . . . . . . . 0 120,000
Las Vegas Distribution Center . . . . . . . . . . . . 0 173,000
Carlsbad Properties . . . . . . . . . . . . . . . . . 225,000 0
Carlsbad II . . . . . . . . . . . . . . . . . . . . . 45,000 0
Omaha . . . . . . . . . . . . . . . . . . . . . . . . 100,000 0
Escrowed Funds for Technology acquisition (Note 3b) . . 230,000 0
Option Agreements (Note 1b) . . . . . . . . . . . . . . 389,988 0
Property Acquisition Florida (Note 3) . . . . . . . . . 450,000 0
Escrowed Funds . . . . . . . . . . . . . . . . . . . . 136,000 0
------------ ------------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . 19,426,571 8,344,471
------------ ------------
Computer and Office Equipment (Note 2). . . . . . . . . . 255,864 70,614
Furniture and Fixtures (Note 2) . . . . . . . . . . . . . 172,273 0
Vehicles (Note 2) . . . . . . . . . . . . . . . . . . . . 101,000 0
Accumulated Depreciation . . . . . . . . . . . . . . . . (197,387) 0
------------ ------------
TOTAL PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . 331,750 70,614
------------ ------------
Other Assets:
Proprietary Technology (Note 1b) . . . . . . . . . . . 523,630 225,000
Deposit . . . . . . . . . . . . . . . . . . . . . . . 10,000 0
Web Site Development . . . . . . . . . . . . . . . . . 33,000 0
COBS (Acquisition) (Note 3) . . . . . . . . . . . . . . 6,700,000 0
Real Estate (Note 3)
Aspen Cove Resort . . . . . . . . . . . . . . . . . . 2,600,000 2,600,000
Valley Lane Property . . . . . . . . . . . . . . . . 250,000 250,000
San Francisco, CA Property . . . . . . . . . . . . . 2,650,000 0
Seogerville, Texas Property . . . . . . . . . . . . . 1,500,000 0
Chapel Downs, Texas . . . . . . . . . . . . . . . . 1,200,000 0
------------ ------------
TOTAL OTHER ASSETS. . . . . . . . . . . . . . . . . . . 15,466,873 10,875,000
------------ ------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . $35,225,194 $11,490,085
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable & Accrued Expenses (Note 1i) . . . . . $ 494,734 $ 4,756
Accrued Liabilities . . . . . . . . . . . . . . . . . . 24,979 0
Sales Tax Payable . . . . . . . . . . . . . . . . . . . 3,624 800
Deferred Revenue . . . . . . . . . . . . . . . . . . . 35,000 0
Loans from Shareholder (Notes 1f & 7) . . . . . . . . . 642,948 339,771
Convertible Note . . . . . . . . . . . . . . . . . . . 650,772 0
Loans From COBS . . . . . . . . . . . . . . . . . . . . 233,485 0
Valley Lane 1st Trust Deed (Note 3). . . . . . . . . . 122,000 150,000
West Palm Beach Land (Note 3) . . . . . . . . . . . . 1,452,000 600,000
Seagerville . . . . . . . . . . . . . . . . . . . . . 530,000 0
San Francisco . . . . . . . . . . . . . . . . . . . . 2,500,000 0
Chapel Downs . . . . . . . . . . . . . . . . . . . . . 465,000 0
Other Loans . . . . . . . . . . . . . . . . . . . . . 1,375,610 0
Aspen Cove 1st Trust Deed . . . . . . . . . . . . . . . 0 800,000
Current Portion of Capital Lease Obligation (Note 8). . 2,087 0
------------ ------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 8,532,239 1,895,327
Stockholders' Equity:
Common Stock, $.001 par value; 200,000,000 shares
authorized; shares issued and outstanding
41,235,548 and 51,946,173 (Notes 1b, 1k, 3 & 5) . . . 69,763 51,946
Preferred A, $.001 par value; 50,000,000 shares
authorized; shares issued and outstanding
17,000,000 (Notes 1b, 1k, 3 & 5) . . . . . . . . . . 20,500 -
Preferred B, $.001 par value; 500,000,000 shares
authorized; shares issued and outstanding
104,930,716 (Notes 1b, 1k, 3 & 5). . . . . . . . . . 1,115,187 -
Additional Paid in Capital - . . . . . . . . . . . . . 25,100,359 12,937,407
Stock Options . . . . . . . . . . . . . . . . . . . . . 2,167,000
Retained Deficit. . . . . . . . . . . . . . . . . . . . (1,697,442) (3,263,595)
Less Treasury Stock at Cost . . . . . . . . . . . . . . (82,412) (127,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT). . . . . . . . . 26,692,955 9,598,758
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . . $ 35,225,194 $11,490,085
============ ============
See notes to consolidated financial statements.
3
CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the Three Months Ended September 30, 2006 & 2005 and
For the Nine Months Ended September 30, 2006 & 2005
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues
Rental Income (Note 1e)$ 12,625 $ 1,100 $ 22,851 $ 1,100
Sales COBS 864,424 0 1,172,913 0
Operational Income 0 28,406 0 28,406
Commission Income -0- -0- -0- -0-
------------ ------------ ------------ ------------
Total Revenues 877,049 31,706 1,195,764 31,706
Cost of Sales
Cost of Goods Sold-COBS 561,763 0 832,633 0
Real Estate Purchase 0 900,000 1,284,327 1,284,327
Commission Expense . 0 -0- 175,108 6,900
------------ ------------ ------------ ------------
Gross profit . . . . . 315,286 868,294 188,023 1,291,227
Other Costs and Expenses
General & Administrative 921,901 45,536 2,847,325 610,196
Consulting Fees 41,804 0 267,175 0
Professional Fees 171,316 0 385,789 0
Payroll 32,380 0 66,122 0
Public Relations 0 0 180,409 0
Real Estate Taxes 14,564 0 14,564 0
Sales and Marketing 40,143 0 40,143 0
------------ ------------ ------------ ------------
TOTAL OTHER COSTS AND
EXPENSES 1,222,108 45,536 3,801,527 1,259,521
------------ ------------ ------------ ------------
Other Income (Expense)
Interst Income 32 0 32 0
Interst Expense (4,545) 0 (9,545) 0
Note and Interest 0 0 7,197,390 0
Other Income 0 0 (878,910) 0
Loss on Real Estate
Escrow Deposits (343,000) 0 (343,000) 0
------------ ------------ ------------ ------------
TOTAL OTHER
INCOME(EXPENSE) (347,513) 0 5,965,967 0
------------ ------------ ------------ ------------
Net (loss) $(1,254,335) $ (913,830) $(2,475,596) $(1,869,717)
============ ============ ============ ============
Net (loss)
Per share:
Basic & Diluted (0.03) (0.01) (0.06) (0.01)
Weighted average
Shares outstanding:
Basic & Diluted 41,235,548 51,946,173 41,235,548 51,946,173
See notes to consolidated financial statements.
4
CAL-BAY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months Ended September 30, 2006 & 2005
Nine Months Ended
September 30
--------------------
2006 2005
--------- ---------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . $2,475,596 $ (913,830)
--------- ---------
Adjustments to reconcile net
Income (loss) to net cash
Provided by operating activities
Depreciation . . . . . . . . . . . . 193,352 2,244
Changes in Assets and Liabilities
Accounts Receivable . . . . . . . (7,519,156) 0
Prepaid Expenses . . . . . . . . . (4,250) 0
Other Assets . . . . . . . . . . . (43,243) 0
Accounts Payable . . . . . . . . . 426,620 0
Accrued Liabilities . . . . . . . 63,303 0
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES . . . . . . . (4,407,478) (911,586)
--------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition Deposits . . . . . . . . (3,654,994)
COBS Acquisition . . . . . . . . . . (6,700,000) 0
Purchase of Real Estate (5,350,000) (900,000)
Purchase of fixed asset. . . . . . . (777,431) -0-
--------- ---------
NET CASH USED BY
INVESTING ACTIVITIES . . . . . . . (16,482,425) (900,000)
--------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Capital Obligation-net 2,087 0
Repayment of Officer Loans (218,395) 25,000
Proceeds from Shareholder Loans 329,198 686,568
Proceeds from Notes Payable 5,754,867 626,000
Repayment of Notes Payable (828,000)
Proceeds from Additional Capitalization 15,888,661 621,914
Payment of Dividends (123,133)
Proceeds from Short Term Loans 0 12,500
--------- ---------
NET CASH FLOWS PROVIDED BY(used) BY
FINANCING ACTIVITIES 20,805,285 1,971,982
--------- ---------
NET INCREASE (DECREASE) IN CASH . . . (84,618) 160,396
Cash & equivalents,
December 31, 2006,2005 . . . . . . 17,410 41,075
--------- ---------
Cash & equivalents,
End of period. . . . . . . . . . . $(67,208) $201,471
--------- ---------
Cash Paid for taxes . . . . . . . . -0- -0-
========= =========
See notes to consolidated financial statements.
5
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(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.
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 supplied analytical products, services and associated equipment
through license distribution agreements, and received 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 January 6,
2005, all the assets and liabilities of CBA were sold along with CBC
to Robert Thompson and Charles Prebay in exchange for their shares in
CBYI and delivery of Atlantis Holdings, Inc., a shell company traded
on the pink sheets. As a result of this transaction the Company was
reorganized with the Company's primary focus being the acquisition,
management and sales of real estate.
As of the Quarter ended September 30, 2006 the Company has purchased,
entered into contracts or escrows for the following properties:
- -------------------------------------------------------------------------------
ASPEN COVE, LAKEFRONT PROPERTY, UTAH OWNED
In the second quarter of 2005, the company acquired Aspen Cove Resort,
Panguitch Lake, Utah; Comprised of a 45 acre lakefront package of
development land and an operational 14 room lakefront lodge. The
Company plans to build 21 luxury 3000+square feet vacation homes on
the panoramic mountain top lakefront property, each on approximately
one acre lots. The property was acquired for $2.6 Million in a
combination of cash and Preferred shares. There was an $800,000 first
trust deed against the property which has since been paid in full. As
of June 30, 2006 the properties estimated appraised value by the
Company's management is now $5 Million. The company acquired the
property through the assumption of a first mortgage on the property.
In the third quarter ending March 31, 2005 the Company assumed
control of Aspen Cove Resort, Inc., the administrative company for
the Aspen Cove resort and property. On March 14, 2006 the Company
entered into two SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
Agreements totaling $1,626,458.33. The company used a portion of
those funds to pay off the $800,000.00 first trust deed. An 8-k was
filed on March 20 2006 disclosing the event. The funding was provided
by an offshore group "Professional Traders Fund LLC" who in May 2006
filed suit against the company for failing to file the Registration
statement to register shares for the repayment of the loan. The
company has consequently filed a counter suit against "Professional
Traders Fund LLC."
LAS VEGAS WAREHOUSE I, NV. ESCROW
The purchase fell out of escrow in the third quarter 2006.The Company
had $173,000.00 in escrow which was used for fees.
LAS VEGAS SINGLE FAMILY RENTAL RESIDENCE. OWNED
In the second quarter of 2005, a single family 2500 square feet
residence on Valley Drive in Las Vegas was acquired for $250,000.The
property has a $150,000 first trust deed and is currently rented. As
of June 30, 2006, the property has an estimated value of $330,000
and the first trust deed has been reduced to $122,000.
WEST PALM BEACH LAND PARCEL, FLORIDA (STONEWALL ESTATES). OWNED
In the 3rd quarter ending September 30, 2005 the Company purchased
the first mortgage position (the "NOTE") on a parcel of land
comprising of approximately 290 acres in West Palm Beach, Florida.
The company purchased the note on the property from Ararat LLC for
$5,500,000 payable as follows;$1,500,000 cash and $4,000,000 of the
Company's Preferred B stock. This note was accruing interest at the
rate of approximately $32,000.00 per month and matured in the first
quarter of 2006.Its original value upon maturity was estimated to be
approximately $8,000,000.00.The Preferred B shares issued to Ararat,
LLC for the purchase were cancelled by mutual agreement due to the
stock value after the company's reverse split in 2005. Ararat is
still owed Preferred B shares and the number of shares to be issued
is to be determined. The current status as of June 30, 2006: the
property has since been sold to Lennar Homes for $13.6M and
Cal-Bay's first secured mortgage position (as recorded in the West
Palm Beach County Recorders Office, 2005) is awaiting distribution
of proceeds which are currently under the control of a Court
appointed Trustee in Aberdeen, Mississippi. Cal-Bay's council
uncovered an underlying promissory note which has been accruing
interest on the principal note which according to Cal-Bay's legal
department the combined notes now have a combined face value of
$14,997,390 and are still accruing interest until distribution of
proceeds.
SOUTHERN CALIFORNIA RESIDENTIAL PROPERTY I. ESCROW
The Company is in escrow to acquire a Southern California
residential property for the sum of $2,600,000. The Company
currently has $125,000in escrow for the acquisition. The property
has an appraised value of$3,200,000 and will generate approximately
$144,000 per annum inrevenue.
F-6
WAREHOUSE II, LAS VEGAS, NEVADA
The purchase fell out of escrow.The Company had $50,000.00 in escrow
which was consumed by escrow fees.
NORTH HOLLYWOOD, REDEVELOPMENT PROPERTY.
The purchase fell out of escrow.The Company had $120,000.00 in escrow
which was forfeited.
SOUTHERN CALIFORNIA RESIDENTIAL RENTAL PROPERTY II. ESCROW
In the second quarter of 2006, the company opened escrow for the
purchase of a $900,000 residential rental property in Southern
California. The property has estimated annual rental revenue of
approximately $50,000 plus a significant increase in value due to
location. This property is expected to close in the Third quarter
2006.
SAN FRANCISCO, CALIFORNIA, COMMERCIAL PROPERTY. OWNED
The company acquired two commercial warehouse properties in the
downtown area of San Francisco in the second quarter 2006. The
purchase price was $2,650,000. The company is indebted for a total
of $2,500,00 by way of first and second mortgages. The company plans
to demolish the existing buildings and construct 16-18 luxury
apartments or a company owned and operated Self-Storage facility. As
of June 30, 2006 management estimates the current property value to
be in the region of $3,300,000.
OMAHA, NEBRASKA, RESIDENTIAL PROPERTY PORTFOLIO. ESCROW
The company opened escrow for a 48 residential rental home portfolio
in Omaha, Nebraska. The purchase price is $4,850,000. The contract is
comprised of: $1,100,000 cash, $1,250,000 Class B Preferred shares,
and an owner carried note of $2,500,000 at 6.7% annually. The rental
revenues are approximately $550,000 annually. The company has
$100,000 in escrow for the transaction. Closing is expected in the
third quarter 2006.
SEAGOVILLE, TEXAS COMMERCIAL PROPERTY. OWNED
In the second quarter the company acquired a 23,000+ square Feet
commercial/retail center in Seagoville, Texas for $1,500,000 in all
cash purchase. The property has several retail tenants and is in need
of some cosmetic restoration. The property was appraised in February
2006 for $1,500,000. The property is directly in the path of the
Dallas Trinity River project, which in the opinion of Cal-Bay's
management will significantly increase the property's value within
the next two years. As of June 30, 2006, The property is generating
approximately $7500 per month in rentals at a minimal occupancy. The
company plans to increase the occupancy significantly during the
third quarter. Cal-Bay is indebted to a Texas Bank by way of a first
mortgage on the property in the approximate amount of $530,000.
CHAPEL DOWNS, DALLAS, TEXAS. SPORTING/RECREATIONAL CENTER. OWNED
In the second quarter the company acquired a sporting/recreational
center in the Chapel Downs area of Dallas, Texas. The purchase was
$1,200,000, comprised of a combination of cash and restricted shares.
The property appraised at approximately $1,200,000 in March 2006.
Monthly revenues are approximately $15,000. The company is indebted
on a first mortgage position in the amount of $465,000 as of June 30,
2006.
HIGH sPRINGS, fLORIDA. SINGLE FAMILY RESIDENCE OWNED
In the third quarter 2006, the Company acquired a single family home
in High springs, Fla. for $450,000.00. The residence is on 5.5 acres
with a lease pending.
(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.
F-7
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(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, 2004, 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, 2004, the Company issued 3,684,031
restricted common shares in payment for consulting services. Also on
September 9, 2004, 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.
In March and November of 2004, the Company filed Form S-8 Registration
Statements with the Securities and Exchange Commission and issued
5,500,000 unrestricted common shares in payment for consulting
services.
On January 5, 2005, the Company issued 15,000,000 restricted common
shares to Roger Pawson to acquire TLCO Software, Inc. (TLCO). TLCO has
no recent history of operations and its only asset is proprietary
technology consisting of source code forcertain software applications.
The condensed unaudited pro forma disclosure is not provided herein,
as the resulting pro forma financial statements after the transactions
above result in no activities over the last two fiscal years.
On January 6, 2005, the former CEO, Robert Thompson, and former Vice
President, Charles Prebay, resigned as officers and directors of the
Company exchanging all their remaining shares with Mr. Roger Pawson,
the new CEO and director. As part of the transaction, the Companys
subsidiaries CBC and CBA have been spun off into Atlantis Holding
Corporation, a pink sheet company now owned by Robert Thompson and
Chuck Prebay.
On February 17, 2005, the Company issued 6,000,000 unrestricted common
shares for consulting services and another 4,000,000 shares for
consulting services.
On June 25 the Company issued 5,277,142 restricted shares as a result
of completing a Private Placement for $378,290.
During the three months ended June 30, 2005, as detailed in a Form 8K
filing, the Company repurchased from the open market shares at a
total repurchase cost of $127,000. The Company has retired those
shares. The accounting for treasury stock transactions is under the
cost method.
On November 25, 2005 the board of directors approved a reverse split
of the Company's common stock and a PRE 14c information statement was
filed with the Securities and Exchange Commission whereby each 25
common shares were converted to 1 share (a one for twenty five share
reverse stock split). Total outstanding shares subsequent to the
reverse split equated to 2,077,847 shares.86,699 shares were cancelled
The issued and outstanding shares as of year end June 30, 2006 was
1,991,148 shares.
In the first quarter of 2006 8,043,660 common shares were issued;
2,043,660 for $245,652 cash through a private offering;the balance for
real estate related services and acquisitions. At the end of the
quarter ending June 30, 2006 there were 10,034,808 shares issued.
On March 14, 2006 CAL BAY INTERNATIONAL, INC. entered into two SENIOR
SECURED CONVERTIBLE PROMISSORY NOTE Agreements totaling $1,626,458.33.
As part of the Note Agreements the Company entered into four Warrant
agreements.
Warrants were issued on March 14, 2006 pursuant to SENIOR SECURED
CONVERTIBLE PROMISSORY NOTES covering the resale by selling
shareholders of up to 1,694,228 shares of common stock as follows:
o 1,016,537 shares of common stock underlying warrants
exercisable at $.80 issued to certain of the selling
stockholders pursuant to SENIOR SECURED CONVERTIBLE
PROMISSORY NOTES on March 14, 2006;
o 677,691 shares of common stock underlying warrants
exercisable at $1.20 issued to certain of the selling
stockholders pursuant to SENIOR SECURED CONVERTIBLE
PROMISSORY NOTES on March 14, 2006;
An 8-k information statement was filed disclosing the SENIOR SECURED
CONVERTIBLE PROMISSORY NOTES and subsequent issuance of warrants as
part of that agreement. In May 2006 "Professional Traders Fund LLC"
filed suit against the company for failing to file the Registration
statement to register shares for the repayment of the loan. The
company has subsequently filed a counter suit against "Professional
Traders Fund LLC".
In the quarter ended September 30,2006 the Company issued 18,438,047
shares of common stock for: acquisitions, a private offering of
common stock, and an interest payment in lieu of cash for a note. At
the end of the quarter there were a total of 41,235,548 common shares
outstanding. 17,402,000 shares of Preferred B stock were issued for
an acquisition and for cash.2,000,000 shares of Preferred A stock was
issued to an officer of the Company in lieu of repayment of loans
made to the Company.
The President of the Company, Roger Pawson exercised a prepaid option
agreement in the amount of $389,988. The option agreement is for
common shares and is convertible in the year 2008.
(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.
(d) Principles of Consolidation and Basis of Accounting
The accompanying consolidated financial statements included the
accounts of Cal-Bay International, Inc. and of its wholly owned
subsidiaries. All material inter-company transactions and
accounts have been eliminated in consolidation.
F-8
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(1) Summary of Significant Accounting Policies (Continued)
(e) Revenue Recognition
The Company recognizes rental income when it is received. The Company
recognizes income from the sale of property when it is received.
(f) Related Party Receivables / Payables
In the year 2006, Roger Pawson the CEO of the Company, has made
loans to the Company in the amount of $557,241.
2,000,000 shares of Preferred A stock was issued in lieu of repayment
of the loans in the quarter ending June 30, 2006.
The Company has made loans to the Aspen Cove property for operations
which will be repaid out of opertional cash flow from the property.
(g) Deposits
This balance consisted 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.
F-9
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(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 CBAY. The
trading price at September 30, 2006, was $0.04.
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.
F-10
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(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 transactions 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
initiated after June 30, 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.
F-11
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(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 2004, 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, 2004. 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 2004, 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.
(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 Sept.30, 2006. 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.
F-12
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(2) Office Furniture and Equipment
A summary of equipment is as follows as of September 30, 2006, and 2005:
2006 2005
--------- --------
Office Furniture &
Computer Equipment . . . . . $ 428,137 $74,658
Vehicle 101,000
Subtotal . . . . . . . . . . . 529,137 74,658
Less: Accumulated Depreciation (197,387) (2,244)
--------- --------
Net Furniture and Equipment. $331,750 $72,414
========= ========
(3) Acquisition of Real Estate
The Status of the Company's current Real Estate Holdings:
As of the Quarter ended September 30, 2006 the Company has purchased,
entered into contracts or escrows for the following properties:
- --------------------------------------------------------------------
ASPEN COVE, LAKEFRONT PROPERTY, UTAH OWNED
In the second quarter of 2005, the company acquired Aspen Cove Resort,
Panguitch Lake, Utah; Comprised of a 45 acre lakefront package of
development land and an operational 14 room lakefront lodge. The
Company plans to build 21 luxury 3000+square feet vacation homes on
the panoramic mountain top lakefront property, each on approximately
one acre lots. The property was acquired for $2.6 Million in a
combination of cash and Preferred shares. There was an $800,000 first
trust deed against the property which has since been paid in full. As
of June 30, 2006 the properties estimated appraised value by the
Company's management is now $5 Million. The company acquired the
property through the assumption of a first mortgage on the property.
In the third quarter ending March 31, 2005 the Company assumed
control of Aspen Cove Resort, Inc., the administrative company for
the Aspen Cove resort and property. On March 14, 2006 the Company
entered into two SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
Agreements totaling $1,626,458.33. The company used a portion of
those funds to pay off the $800,000.00 first trust deed. An 8-k was
filed on March 20 2006 disclosing the event. The funding was provided
by an offshore group "Professional Traders Fund LLC" who in May 2006
filed suit against the company for failing to file the Registration
statement to register shares for the repayment of the loan. The
company has consequently filed a counter suit against "Professional
Traders Fund LLC."
LAS VEGAS WAREHOUSE I, NV. ESCROW
The purchase fell out of escrow in the third quarter 2006.The Company
had $173,000.00 in escrow which was used for fees.
LAS VEGAS SINGLE FAMILY RENTAL RESIDENCE. OWNED
In the second quarter of 2005, a single family 2500 square feet
residence on Valley Drive in Las Vegas was acquired for $250,000.The
property has a $150,000 first trust deed and is currently rented. As
of June 30, 2006, the property has an estimated value of $330,000
and the first trust deed has been reduced to $122,000.
WEST PALM BEACH LAND PARCEL, FLORIDA (STONEWAL ESTATES). OWNED
In the 3rd quarter ending September 30, 2005 the Company purchased
the first mortgage position (the "NOTE") on a parcel of land
comprising of approximately 290 acres in West Palm Beach, Florida.
The company purchased the note on the property from Ararat LLC for
$5,500,000 payable as follows;$1,500,000 cash and $4,000,000 of the
Company's Preferred B stock. This note was accruing interest at the
rate of approximately $32,000.00 per month and matured in the first
quarter of 2006.Its original value upon maturity was estimated to be
approximately $8,000,000.00.The Preferred B shares issued to Ararat,
LLC for the purchase were cancelled by mutual agreement due to the
stock value after the company's reverse split in 2005. Ararat is
still owed Preferred B shares and the number of shares to be issued
is to be determined. The current status as of June 30, 2006: the
property has since been sold to Lennar Homes for $13.6M and
Cal-Bay's first secured mortgage position (as recorded in the West
Palm Beach County Recorders Office, 2005) is awaiting distribution
of proceeds which are currently under the control of a Court
appointed Trustee in Aberdeen, Mississippi. Cal-Bay's council
uncovered an underlying promissory note which has been accruing
interest on the principal note which according to Cal-Bay's legal
department the combined notes now have a combined face value of
$14,997,390 and are still accruing interest until distribution of
proceeds.
SOUTHERN CALIFORNIA RESIDENTIAL PROPERTY I. ESCROW
The Company is in escrow to acquire a Southern California
residential property for the sum of $2,600,000. The Company
currently has $125,000in escrow for the acquisition. The property
has an appraised value of$3,200,000 and will generate approximately
$144,000 per annum inrevenue.
WAREHOUSE II, LAS VEGAS, NEVADA
The purchase fell out of escrow.The Company had $50,000.00 in escrow
which was consumed by escrow fees.
NORTH HOLLYWOOD, REDEVELOPMENT PROPERTY.
The purchase fell out of escrow.The Company had $120,000.00 in escrow
which was forfeited.
SOUTHERN CALIFORNIA RESIDENTIAL RENTAL PROPERTY II. ESCROW
In the second quarter of 2006, the company opened escrow for the
purchase of a $900,000 residential rental property in Southern
California. The property has estimated annual rental revenue of
approximately $50,000 plus a significant increase in value due to
location. This property is expected to close in the Third quarter
2006.
SAN FRANCISCO, CALIFORNIA, COMMERCIAL PROPERTY. OWNED
The company acquired two commercial warehouse properties in the
downtown area of San Francisco in the second quarter 2006. The
purchase price was $2,650,000. The company is indebted for a total
of $2,500,00 by way of first and second mortgages. The company plans
to demolish the existing buildings and construct 16-18 luxury
apartments or a company owned and operated Self-Storage facility. As
of June 30, 2006 management estimates the current property value to
be in the region of $3,300,000.
OMAHA, NEBRASKA, RESIDENTIAL PROPERTY PORTFOLIO. ESCROW
The company opened escrow for a 48 residential rental home portfolio
in Omaha, Nebraska. The purchase price is $4,850,000. The contract is
comprised of: $1,100,000 cash, $1,250,000 Class B Preferred shares,
and an owner carried note of $2,500,000 at 6.7% annually. The rental
revenues are approximately $550,000 annually. The company has
$100,000 in escrow for the transaction. Closing is expected in the
third quarter 2006.
SEAGOVILLE, TEXAS COMMERCIAL PROPERTY. OWNED
In the second quarter the company acquired a 23,000+ square Feet
commercial/retail center in Seagoville, Texas for $1,500,000 in all
cash purchase. The property has several retail tenants and is in need
of some cosmetic restoration. The property was appraised in February
2006 for $1,500,000. The property is directly in the path of the
Dallas Trinity River project, which in the opinion of Cal-Bay's
management will significantly increase the property's value within
the next two years. As of June 30, 2006, The property is generating
approximately $7500 per month in rentals at a minimal occupancy. The
company plans to increase the occupancy significantly during the
third quarter. Cal-Bay is indebted to a Texas Bank by way of a first
mortgage on the property in the approximate amount of $530,000.
CHAPEL DOWNS, DALLAS, TEXAS. SPORTING/RECREATIONAL CENTER. OWNED
In the second quarter the company acquired a sporting/recreational
center in the Chapel Downs area of Dallas, Texas. The purchase was
$1,200,000, comprised of a combination of cash and restricted shares.
The property appraised at approximately $1,200,000 in March 2006.
Monthly revenues are approximately $15,000. The company is indebted
on a first mortgage position in the amount of $465,000 as of June 30,
2006.
HIGH sPRINGS, fLORIDA. SINGLE FAMILY RESIDENCE OWNED
In the third quarter 2006, the Company acquired a single family home
in High springs, Fla. for $450,000.00. The residence is on 5.5 acres
with a lease pending.
COBS HOMES, LLC (COMPLETE OWNER BUILDER SERVICES). OWNED
In the second quarter 2006, Cal-bay completed the acquisition of COBS
Homes, LLC; an Oceanside, California based online virtual builder
support company. Cal-Bay acquired COBS for $6,700,000 in Preferred
company shares and cash. COBS has 24 employees and approximately
$6,000,000 in projected revenues for 2006. COBS will be relocating TO
Cal-Bay's Carlsbad, California Corporate Offices in the third quarter
of 2006. For further information on COBS please direct to
www.cobshomes.com.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MANGEMENTS FORWARD LOOKING STATEMENT REGARDING VALUATIONS
Property Values.
Accounting practices only allow for the actual purchase
price (BOOK VALUE) of the property or acquisition at the
time of purchase, current market prices will in most
cases differ from the actual purchase price.
The following is Managements assessment of the company's
assets and current market value as of December 1st, 2006.
Property or Asset Reported Value Market Value
Aspen Cove Resort $ 2.6 M $ 5.0 M
Valley Lane LV $ 0.25M $ .35 M
Seogerville TX $ 1.5 M $ 1.5 M
Chapel Downs TX $ 1.2 M $ 1.3 M
Omaha NE Escrow $ .1 M $ .1 M
Port Charlotte FL $ 3.1 M $ 3.5 M
Las Vegas 54SFR $24.5 M $25.5 M
Bonita CA Land $ 7.5 M $13.95 M
I-Beach CA $ 4.7 M $ 4.7 M
High Springs FL SFR $ .45M $ .48 M
FL 1st TD Note $14.99M $14.99 M
TLCO Software $ .52M $ 1.0 M
MB3 Motor Sports $ 2.5 M $ 2.5 M
--------------- ---------------
TOTALS $63.91M $74.87 M
Management's property valuations are based upon actual appraisals
and current market comparisons where applicable.
(3) Acquisition of Real Estate
(a) Subsequent Events\Acquisition of real Estate
Subsequent Events
- -----------------------------------------------------------------
PENDING CONTRACTS/ESCROWS:
As of September 30, 2006 the following properties are currently in
negotiations:
MESQUITE, NEVADA.
A 300 plus Condominium Golf Course frontage
development.
Lafayette, Louisiana.
A 400-1000 Single family home, Golf course environment
development.
In addition the Company has acquired Mb3 Motorsports,LLC in the 4th
Quarter 2006. Mb3 Motorsports is a NASCAR governed ARCA Race Team
located in Mooresville, South Carolina, consisting of a fully
equipped ARCA/Busch ready race team, with 6 vehicles, race workshop,
and full crew. The acquisition inludes the #14 ARCA race license.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(3) Acquisition other than Real Estate
(b) During the quarter ended September 30, 2006 the Company
invested an additional 273,630.00 in the acquisition of
technology (consisting of software) towards its TLCO
division for the development of Construction\Development
& Property Management System Technology.
In addition $230,000 was escrowed for the acquisition of
additional technology for TLCO's technology development.
F-13
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(4) Certain Beneficial Owners and Management
The following table sets forth as of Sept. 30, 2006 the name and the
number of shares of the Registrant's Common Stock, no par value, held
of record or was known by the Registrant to own beneficially more
than 5% of the 41,235,548 issued and outstanding shares of the
Registrant's Common Stock, and the name and shareholdings of each
officer and director individually and of all officers and directors
as a group.
September 30, 2006
-------------------------------
Shareholder/Position/Title Shares Held Ownership
- --------------------------------------- ----------------- -------------
Roger Pawson, President & CEO* 0 0 %
Enray 2,000,000 4.9
Ino Pro Marketing 2,000,000 4.9
Klein capital management 2,000,000 4.9
Sound Development LLC 10,000,000 24.0
----------------- -----------
16,000,000 38.7 %
Total held by Officers & Directors
and held by shareholders with over
5% of the issued and outstanding
shares. 16,000,000 38.7 %
----------------- -------------
Total shares issued & outstanding 41,235,548 100.0%
================= =============
*Roger Pawson, CEO, has been issued 17,000,000 shares of Preferred A stock
as of September 30, 2006.
Preferred A Shares
As of Sept. 30, 2006 there were 17,000,000 shares of Preferred A stock
issued.
Preferred B Shares
As of Sept. 30, 2006 there were 104,930,716 shares of Preferred
B stock issued and outstanding. Shares were issued for financing
and acquisitions.
F-14
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(5) Income Taxes
As of Sept. 30, 2006, the Company had provided taxes on consolidated
income for Federal and State income taxes, estimated at $0.
(6) Off Balance Sheet Risk
The Company could be affected by the inability to establish a market
for their shares of stock.
(7) Loans Payable and Receivable
Roger Pawson the CEO of the Company has made loans to the Company in
the amount of $557,241.
2,000,000 share of Preferred A stock was issued to Roger Pawson in lieu
of repayment of his loans.
F- 15
CAL-BAY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(8) Leases
The Company leased certain office equipment that was terminated upon
the spinoff.
(9) Commitments and Contingencies
The Company leased an office facility in Carlsbad, California at the rate
of $1,500 a month through the end of the quarter ending December 31, 2006.
In the fourth quarter subsequently the Company has moved into larger office
space at 2111 Palomar Airport Road, Suite 100, Carlsbad, CA 92009.
(10) Subsequent events
Subsequent Real Estate acquisitions are noted in Note 3a.
F-16
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. 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.
On January 5, 2005, Cal-Bay International,Inc. completed the acquisition of TLCO
Software, Inc. TLCO Software is a Nevada corporation that designs proprietary
software programs for commercial use in the internet web-hosting industry.
One-hundred percent (100%) of the outstanding shares of TLCO Softwares
common stock were acquired from the former owner, Mr. Roger Pawson of
San Diego, California for consideration of Fifteen million (15,000,000)
shares of Cal-Bay International (CBYI) common stock. TLCO Software, Inc. now
operates as a wholly-owned subsidiary of Cal-Bay International, Inc.
On January 6, 2005, Cal-Bay International, Inc. also completed the sale of its
subsidiary companies, Cal-Bay Controls, Inc., Cal-Bay Analytical, Inc., and
WetChem, Inc. to Atlantis Holding Corp. Both Cal-Bay Controls and Cal-Bay
Analytical are Nevada corporations that operate as sales representative and
distribution companies in the Western US for environmental, process-control,
safety and laboratory instrumentation and related products and services.
Cal-Bay Controls, Cal-Bay Analytical and WetChem will operate in the future as
wholly-owned subsidiaries of Atlantis Holding Corp. Atlantis Holding Corp is a
Pink Sheet company, incorporated in the State of Nevada.
On January 7, 2005, Cal-Bay International, Inc. announced the resignations of
Robert J. Thompson and Charles A. Prebay from its board of directors and as
officers of the company and announced the appointment of Roger Pawson to its
Board of Directors, where he will serve as Chairman of the Board. Mr. Pawson
was also appointed to the positions of President and CEO, Secretary and
Treasurer of Cal-Bay International, Inc.
OUR BUSINESS
The Company has acquired numerous real estate properties and is in escrow
for the acquisition of four other properties. The Company will continue to
expand its current properties where feasible and will continue to acquire
additional properties as well. In addition where necessary the Company will
manage its properties.
The Company is dependent upon raising additional funds both for expansion plans
and for its operations.
In addition the Company is negotiating for distribution of its TLCO software
products.
On June 15, 2006, the Company issued a news release announcing
a final agreement for the acquisition of California based Cobs Homes,
a premier online homebuilder support services company. COBS annual
revenues are currently in excess of $5M per year and through the
Cal-Bay alliance COBS has plans for major growth and expansion. COBS
has assisted with the building of over 6,000 homes since inception.
www.cobshomes.com
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THREE MONTH PERIODS ENDED September 30, 2006 AND 2005
Cal Bay generated $877,049 in revenues for the three months ended Sept 30,
2006 compared to $0 in revenues for the same period in 2005. Operating
expenses for the three months ended Sept., 2006 were $1,22,108 compared to
$45,536 for the same period in 2005. Total net income (loss) for the three
months ended September 30, 2006 was ($1,254,335) compared to a loss of
($ 913,830).
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2006, Cal-Bay had total assets of $35,225,194. Those
assets are comprised primarily of the real estate the company acquired,
the acquisition of COBS homes. $523,630 of the assets are comprised of the
proprietary software TLCO. $14,997,390 is comprised of the Stonewall Note.
Current liabilities totaled $8,532,239.00.
The company believes that in order to maintain its current real estate holdings
and to close escrow on the properties currently in escrow, the Company must
raise additional capital. The Company has no current plan in place to raise
additional capital. The Company may sell additional stock, arrange debt
financing or seek other avenues of raising capital.
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PART II- OTHER INFORMATION
Item 1. Legal Proceedings
Professional Traders Fund, LLC, Filed a lawsuit in New York, NY against the
company in May 2006 for failing to file an SB2 registration statement for
the registration of shares for the repayment of a $1,626,458.33 loan,
primarily used to pay off the mortgage position on the Aspen Cove, Utah
property. The company consequently filed a countersuit against Professional
Traders Fund, LLC which is also filed in New York, NY. Cal-Bay retained the
Los Angeles law firm Richardson & Patel, LLC to represent the company in
this case. As of September30,2006 there wre no changes regarding this
litigation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 9, 2004 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, 2004 we filed a registration statement on Form S-8 dated August
29, 2004 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 2004, 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, 2004, 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.
In January 2005, we issued 15,000,000 shares of restricted common stock for the
acquisition of TLCO Software, a Nevada corporation. The shares were issued to
Mr. Roger E. Pawson who then became the sole officerand director of the Company.
The shares were sold to an accredited investor in a private transaction in
reliance on the exemption provided by Section 4(2)of the Securities Act of 1933.
Cal-Bay did not pay any commissions, use any underwriters or make any public
solicitations in effecting the sale.
In February 2005, we filed a registration statement on Form S-8 reporting the
issuance of 6,000,000 valued at $288,000 and an additional 4,000,000 shares
valued at $64,000. The shares were issued for consulting services unrelated
to fund raising activities.
In June of 2005 we raised $378,290 through the sale of 5,277,142 shares of
restricted stock.
The shares were sold to an accredited investor in a private transaction in
reliance on the exemption provided by Section 4(2)of the Securities Act of 1933.
Cal-Bay did not pay any commissions, use any underwriters or make any public
solicitations in effecting the sale.
In the first quarter of 2006 8,043,660 common shares were issued;
2,043,660 for $245,652 cash through a private offering;the balance for
real estate related services and acquisitions. At the end of the
quarter ending March 31, 2006 there were a total of 10,034,808 shares
of common stock issued and outstanding.
On March 14, 2006 CAL BAY INTERNATIONAL, INC. entered into two SENIOR
SECURED CONVERTIBLE PROMISSORY NOTE Agreements totaling $1,626,458.33.
As part of the Note Agreements the Company entered into four Warrant
agreements.
Warrants were issued on March 14, 2006 pursuant to SENIOR SECURED
CONVERTIBLE PROMISSORY NOTES covering the resale by selling
shareholders of up to 1,694,228 shares of common stock as follows:
o 1,016,537 shares of common stock underlying warrants
exercisable at $.80 issued to certain of the selling
stockholders pursuant to SENIOR SECURED CONVERTIBLE
PROMISSORY NOTES on March 14, 2006;
o 677,691 shares of common stock underlying warrants
exercisable at $1.20 issued to certain of the selling
stockholders pursuant to SENIOR SECURED CONVERTIBLE
PROMISSORY NOTES on March 14, 2006;
An 8-k information statement was filed disclosing the SENIOR SECURED
CONVERTIBLE PROMISSORY NOTES and subsequent issuance of warrants as
part of that agreement.
In the quarter ended September 30,2006 the Company issued 18,438,047
shares of common stock for: acquisitions, a private offering of
common stock, and an interest payment in lieu of cash for a note. At
the end of the quarter there were a total of 41,235,548 common shares
outstanding. 17,402,000 shares of Preferred B stock were issued for
an acquisition and for cash.2,000,000 shares of Preferred A stock was
issued to an officer of the Company in lieu of repayment of loans
made to the Company.
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) 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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K TO DECEMBER 26, 2006.
REPORTS ON FORM 8-K:
8-k August 28, 2006
Reported on Form 8-k:
Item 8.01 OTHER EVENTS - Press Release.
8-k October 3, 2006
Reported on Form 8-k:
Item 8.01 OTHER EVENTS - Press Release.
8-k December 11, 2006
Reported on Form 8-k:
Item 8.01 OTHER EVENTS - Press Release.
8-k December 18, 2006
Reported on Form 8-k:
Item 8.01 OTHER EVENTS - Press Release.
8-k December 22, 2006
Reported on Form 8-k:
Item 4.02 NON-RELIANCE ON PREVIOUSLY ISSUED STATEMENTS.
8-k December 26, 2006
Reported on Form 8-k:
Item 2.01 COMPLETION OF ACQUISITION
EXHIBITS:
NUMBER TITLE LOCATION
31.1 Certification of Chief Executive Officer pursuant to Attached
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Attached
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to Attached
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to Attached
Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized at
the offices of Cal Bay International in Carlsbad, Ca.
CAL-BAY INTERNATIONAL, INC.
Date: December 26, 2006 By: /s/Roger Pawson
----------------------------
Roger Pawson
Chief Executive Officer
Date: December 26, 2006 By: /s/Roger Pawson
---------------------------
Roger Pawson
Chief Financial Officer
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