U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 June 30, 2004

[_]         TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For
            the transition period from _____ to _____

                         Commission file number 0-25417

                              TORBAY HOLDINGS, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)

                DELAWARE                                         52-2143186
     -------------------------------                          ----------------
     (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                         Identification No.)

            140 OLD COUNTRY ROAD, SUITE 205, MINEOLA, NEW YORK 11501
                    (Address of principal executive offices)

                                  516-747-5955
                           (Issuer's Telephone Number)

                                 NOT APPLICABLE
              ----------------------------------------------------
              (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 [_]

The Company had 88,910,987 shares of common stock outstanding as of June 30,
2004.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
Yes [_] No [X]


<PAGE>


                                      INDEX

PART 1 - FINANCIAL INFORMATION

Condensed consolidated balance sheet as of
June 30, 2004 (unaudited)..................................................    3

Condensed consolidated statements of operations and other
comprehensive income (loss) for the three and six months
ended June 30, 2004 and 2003 (unaudited) ..................................    4

Condensed consolidated statements of cash flows for the six months ended
June 30, 2004 and 2003 (unaudited).........................................    5

Notes to condensed consolidated financial statements as of June 30, 2004
(unaudited)................................................................    6

Item 2.  Management's Discussion and Analysis or Plan of Operation ........   11

Item 3.  Controls and Procedures...........................................   22

PART 2 - OTHER INFORMATION

Item 1.  Legal Proceedings.................................................   23

Item 2.  Changes in Securities and Use of Proceeds.........................   23

Item 3.  Defaults Upon Senior Securities...................................   23

Item 4.  Submission of Matters to a Vote of Security Holders...............   23

Item 5.  Other Information.................................................   24

Item 6.  Exhibits and Reports on Form 8-K..................................   24

Signatures.................................................................   24

                                       2
<PAGE>

                     TORBAY HOLDINGS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2004
                                   (UNAUDITED)


                                     ASSETS
CURRENT ASSETS
 Cash                                                            $       40,381
 Accounts receivable, net                                                17,000
 Inventory                                                               11,230
                                                                  --------------
   Total Current Assets                                                  68,611
                                                                  --------------

Property and equipment - net                                             26,345

OTHER ASSETS
 Intangible assets - net                                                103,198
 Deposits                                                                 6,795
                                                                  --------------
   Total Other Assets                                                   109,993
                                                                  --------------

TOTAL ASSETS                                                     $      204,949
                                                                  ==============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
 Accounts payable and accrued expenses                           $      269,402
 Settlement payable                                                     158,318
 Note payable                                                            50,000
                                                                  --------------
   Total Current Liabilities                                            477,720
                                                                  --------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
 Preferred stock, $.0001 par value, 20,000,000 shares
  authorized, 420,000 issued and outstanding                                 42
 Common stock, $.0001 par value, 100,000,000 shares
  authorized, 88,910,987 shares issued and outstanding                    8,891
 Common stock to be issued (500,000 shares)                                  50
 Additional paid-in capital                                           3,856,967
 Accumulated deficit                                                 (4,013,633)
 Accumulated other comprehensive loss                                   (22,677)
 Deferred equity based expense                                         (102,411)
                                                                  --------------

TOTAL STOCKHOLDERS' DEFICIENCY                                         (272,771)
                                                                  --------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                   $      204,949
                                                                  ==============

     See accompanying notes to condensed consolidated financial statements.

                                        3
<PAGE>

                     TORBAY HOLDINGS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      AND OTHER COMPREHENSIVE INCOME (LOSS)
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                For the Three     For the Three      For the Six       For the Six
                                                 Months Ended      Months Ended      Months Ended      Months Ended
                                                June 30, 2004     June 30, 2003     June 30, 2004     June 30, 2003
                                                -------------     -------------     -------------     -------------

<S>                                             <C>               <C>               <C>               <C>
SALES, NET                                      $      82,527     $      31,926     $     159,537     $     43,627

COST OF SALES                                          23,689            11,999            45,732           20,462
                                                -------------     -------------     -------------     -------------

GROSS PROFIT                                           58,838            19,927           113,805           23,165
                                                -------------     -------------     -------------     -------------

OPERATING EXPENSES
 Selling                                               48,410            46,094            73,312            61,805
 Consulting fees                                         -                6,000             6,300           100,750
 Professional fees                                     43,628            77,282            55,813            90,294
 Compensation                                          24,258            13,756            43,010            32,431
 Other general and administrative                      72,912            20,423           118,904            38,544
                                                -------------     -------------     -------------     -------------
      Total operating expenses                        189,208           163,555           297,339           323,824
                                                -------------     -------------     -------------     -------------

LOSS FROM OPERATIONS                                 (130,370)         (143,628)         (183,534)         (300,659)
                                                -------------     -------------     -------------     -------------

OTHER INCOME (EXPENSE)
 Interest and financing costs                         (45,915)          (81,875)         (178,729)         (149,125)
 Gain (loss) on extinguishment of debt, net            (4,026)             -              243,800              -
 Cancellation of stock issued for
 consulting fees                                         -                 -               15,000              -
                                                -------------     -------------     -------------     -------------
      Total other income (expense)                    (49,941)          (81,875)           80,071          (149,125)
                                                -------------     -------------     -------------     -------------

NET LOSS                                             (180,311)         (225,503)         (103,463)         (449,784)

OTHER COMPREHENSIVE INCOME/(LOSS)
 Foreign currency translation (loss) income             1,284            (5,189)           (2,026)              832
                                                -------------     -------------     -------------     -------------

COMPREHENSIVE LOSS                              $    (179,027)    $    (230,692)    $    (105,489)    $    (448,952)
                                                =============     =============     =============     =============

Net loss per common share - basic and
diluted                                         $        -        $       (0.01)    $        -        $       (0.01)
                                                =============     =============     =============     =============

Weighted average number of common shares
 outstanding - basic and diluted                   89,063,734        39,951,962        85,257,340        32,028,625
                                                =============     =============     =============     =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        4

<PAGE>

                     TORBAY HOLDINGS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     2004              2003
                                                                 ------------      ------------
<S>                                                           <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                      $     (103,463)  $      (449,784)
 Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization                                        16,876             9,920
  Gain on extinguishment of debt, net                                (243,800)             -
  Common stock and warrants issued for services                           300            93,500
  Deferred equity based costs recognized                              168,547           104,725
  Financing costs - shares sold below market value                     48,258              -
  Cancellation of shares issued for services                          (15,000)             -
 Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivable                         (13,705)            1,620
   Decrease in inventory                                               26,393            10,225
   Decrease in prepaid expenses                                          -               15,748
   Increase in accounts payable and accrued expenses                   19,534            52,366
                                                                 ------------      ------------
     Net cash used in operating activities                            (96,060)         (161,680)
                                                                 ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of intangibles                                              (20,750)             -
 Purchase of property and equipment                                    (5,447)           (1,650)
                                                                 ------------      ------------
     Net cash used in investing activities                            (26,197)           (1,650)
                                                                 ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of common stock                               183,940             7,000
 Principal payments on settlement payable                             (31,663)             -
 Proceeds from issuance of notes and loans payable                       -              110,000
                                                                 ------------      ------------
     Net cash provided by financing activities                        152,277           117,000
                                                                 ------------      ------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                (2,026)              832
                                                                 ------------      ------------

INCREASE (DECREASE) IN CASH                                            27,994           (45,498)

CASH - BEGINNING OF PERIOD                                             12,387            59,403
                                                                 ------------      ------------

CASH - END OF PERIOD                                           $       40,381   $        13,905
                                                                 ============      ============

Interest paid                                                  $        1,670   $          -
                                                                 ============      ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        5

<PAGE>

                     TORBAY HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2004
                                   (UNAUDITED)

NOTE 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

      (A) Basis of Presentation

      The accompanying condensed consolidated financial statements include the
      accounts of Torbay Holdings, Inc. and its wholly owned subsidiaries,
      Designer Appliances Limited and Designer Appliances, Inc. (collectively,
      the "Company"). These condensed consolidated financial statements have
      been prepared in accordance with accounting principles generally accepted
      in the United States of America for interim financial information and the
      instructions to Form 10-QSB and do not include all the information and
      footnotes required by accounting principles generally accepted in the
      United States of America for complete financial statements. In the opinion
      of management, all adjustments (consisting of normal recurring accruals)
      considered necessary for a fair presentation of the results for the
      interim periods have been included. Operating results for the six months
      ended June 30, 2004 are not necessarily indicative of the results that may
      be expected for the year ended December 31, 2004. The accompanying
      condensed consolidated financial statements and the information included
      under the heading "Management's Discussion and Analysis" should be read in
      conjunction with the Company's audited consolidated financial statements
      and related notes included in the Company's Form 10-KSB for the year ended
      December 31, 2003.

      (B) Use of Estimates

      The preparation of condensed consolidated financial statements in
      conformity with accounting principles generally accepted in the United
      States of America requires management to make estimates and assumptions
      that affect the reported amounts of assets and liabilities and disclosures
      of contingent assets and liabilities at the date of the condensed
      consolidated financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from
      those estimates.

      (C) Loss Per Share

      Basic and diluted loss per common share for all periods presented is
      computed based on the weighted average number of common shares outstanding
      during the periods presented as defined by SFAS No. 128, "Earnings Per
      Share". The assumed exercise of common stock equivalents was not utilized
      for the three and six months ended June 30, 2004 and 2003 since the effect
      would be anti-dilutive. There were 5,000,000 common stock equivalents
      issued and exercised in February 2004. There were no common stock
      equivalents outstanding at June 30, 2004.

      (D) Stock Options and Warrants

      The Company accounts for its stock-based employee compensation plans using
      the intrinsic value based method, under which compensation cost is
      measured as the excess of the stock's market price at the grant date over
      the amount an employee must pay to acquire the stock. Stock options and
      warrants issued to non-employees are accounted for using the fair value
      based method, under which the expense is measured as the fair value of the
      security at the date of grant based on the Black-Scholes pricing model.
      The Company had no options or warrants outstanding at June 30, 2004.

                                        6
<PAGE>

                    TORBAY HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2004
                                   (UNAUDITED)


      (E) Reclassifications

      Certain items have been reclassified in prior period statements to conform
      to the current period presentation. For the three months ended June 30,
      2004 and 2003 $9,453 and $6,683, respectively, representing shipping,
      amortization and warranty costs, have been classified as cost of sales,
      rather than operating expenses. For the six months ended June 30, 2004 and
      2003 these costs were $18,236 and $11,882, respectively. Also, travel and
      entertainment expenses have been reclassified from other general and
      administrative expenses to selling expenses.

      (F) Recent Accounting Pronouncements

      In March 2004, the U.S. Securities and Exchange Commission's Office of the
      Chief Accountant and the Division of Corporate Finance released Staff
      Accounting Bulletin ("SAB") No. 105, "Loan Commitments Accounted for as
      Derivative Instruments". This bulletin contains specific guidance on the
      inputs to a valuation-recognition model to measure loan commitments
      accounted for at fair value, and requires that fair-value measurement
      include only differences between the guaranteed interest rate in the loan
      commitment and market interest rate, excluding any expected future cash
      flows related to the customer relationship or loan servicing. In addition,
      SAB105 requires the disclosure of the accounting policy for loan
      commitments, including methods and assumptions used to estimate the fair
      value of loan commitments, and any associated hedging strategies. SAB 105
      is effective for derivative instruments entered into subsequent to March
      31, 2004 and should also be applied to existing instruments as
      appropriate.

      The Company has not yet completed its evaluation of SAB 105, but does not
      anticipate a material impact on the financial statements.

NOTE 2 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

      During the six months ended June 30, 2004, the Company reached a
      settlement to retire its remaining 12% convertible debentures aggregating
      $507,750 and related accrued interest of $92,057 in exchange for the
      issuance of 6,000,000 shares of common stock having a fair value of
      $162,000, and $200,000 in cash, payable in monthly installments of
      $16,667, with a present value of $189,981, commencing May 1, 2004.
      Accordingly, the Company has recorded a gain of $247,826 related to the
      extinguishment (see Note 4).

      In February 2004, the Company granted options to purchase an aggregate of
      5,000,000 shares of common stock to two individuals in exchange for
      services to be rendered through August 1, 2005. The fair value of these
      options is $112,240. This amount has been deferred and is being amortized
      over the life of the services agreement (see Note 5).

      During April 2004, the Company issued 161,050 shares of common stock to an
      officer to settle a payable to him of $9,663. The shares were issued at a
      discount to market value and the Company has recorded a loss on
      extinguishment of debt of $4,026(see Note 5).

                                        7
<PAGE>

                    TORBAY HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2004
                                   (UNAUDITED)


      During the six months ended June 30, 2003, an aggregate of $126,750 of the
      notes payable issued on May 15, 2002 were converted into 21,173,024 shares
      of common stock (see Note 5).

NOTE 3 INTANGIBLE ASSETS

      During the six months ended June 30, 2004, the Company incurred costs of
      $20,750 for the development of new software applications.

      Intellectual property rights and software licenses are being amortized
      over ten and five years, respectively. Software enhancements are being
      amortized over two years. Amortization commenced in 2003 and amortization
      expense for the six months ended June 30, 2004 and 2003 was $13,180 and
      $7,596, respectively. Amortization expense for the three months ended June
      30, 2004 and 2003 was $7,238 and $3,798, respectively. The amortization
      expense has been included in cost of sales.

NOTE 4 12% CONVERTIBLE DEBENTURES

      On February 17, 2004, the Company and the debenture holders entered into a
      Redemption and Settlement Agreement and Mutual General Release (the
      "Settlement"). In accordance with the Settlement, all of the outstanding
      debentures and related warrants were redeemed by the Company. The Company
      issued 6,000,000 shares of common stock having a fair value of $162,000,
      to the debenture holders, and agreed to pay $200,000 in cash in monthly
      installments of $16,667 commencing May 1, 2004. The Company has recorded a
      gain of $247,826 related to the extinguishment.

NOTE 5 STOCKHOLDERS' DEFICIENCY

      During February and March 2004, the Company issued 6,000,000 shares of
      common stock in connection with the retirement of its 12% convertible
      debentures payable described in Note 5.

      In February 2004, the Company granted options to purchase an aggregate of
      5,000,000 shares of common stock to two individuals in exchange for
      services to be rendered through August 1, 2005. The options had an
      exercise price of $.008 per share and had a life of ninety days from grant
      date. The fair value of these options is $112,240. This amount has been
      deferred and is being amortized over the life of the services agreement
      (seventeen months). The value has been determined using the Black-Scholes
      option pricing model in accordance with SFAS 123 with the following
      assumptions: dividend yield of zero, expected volatility of 178%,
      risk-free interest rate of 3.5% and an expected life of three months. The
      options were exercised in February 2004 and cash proceeds of $40,000 were
      received by the Company.

      During March 2004, the Company sold 202,614 shares of common stock for
      cash proceeds of $17,000. The cash was received in March and the shares
      were issued in April. The shares were sold at a discount to market value,
      and a financing cost related to the discount of $4,013 has been
      recognized.

      During April and May 2004, the Company sold 2,005,168 shares of common
      stock for cash proceeds of $126,940. The shares were sold at a discount to
      market value, and a financing cost related to the discount of $44,245 has
      been recognized.

                                        8
<PAGE>

                    TORBAY HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2004
                                   (UNAUDITED)


      During April 2004, the Company issued 161,050 shares of common stock to
      settle a payable to an officer in the amount of $9,663. The shares were
      issued at a discount to market value and the Company has recorded a loss
      on extinguishment of debt of $4,026.

      During the three months ended March 31, 2004 the Company issued 3,000
      shares of common stock, valued at $300, for services rendered.

      The Company has deferred costs related to the issuance of options for
      services to be rendered through July 2005. During the six months ended
      June 30, 2004, the Company has expensed $41,362 of these costs and
      $102,411 remains deferred at June 30, 2004.

      On February 5, 2003, the Company entered into a two-month non-exclusive
      agreement with a consultant to provide strategic planning services. The
      agreement called for the consultant to receive up to 2,000,000 shares
      whereby 1,251,000 shares of S-8 registered shares were issued upon the
      effective date of the agreement for the initial period. This agreement
      expired on April 4, 2003, and has not been extended. The 1,251,000 shares
      were issued on February 5, 2003, and valued for financial accounting
      purposes at $62,500, the fair market value of the common stock on the
      effective date of the agreement based on concurrent cash offerings.

      On February 6, 2003, the Company entered into a one-year non-exclusive
      agreement with a consultant to provide strategic planning services. Under
      the agreement, the consultant received 250,000 shares of restricted common
      stock upon the effective date of the agreement for the initial period. The
      250,000 shares were valued for financial accounting purposes at $15,000,
      the fair market value of the common stock on the effective date of the
      agreement based on concurrent cash offerings, and were issued in the
      second quarter of 2003. This agreement terminated in February 2004 and
      there is no other amount owed. Additionally, the parties agreed to cancel
      the 250,000 shares originally issued in 2003 and the Company recorded a
      credit of $15,000 in other income in February 2004.

      On February 7, 2003, the Company entered into an agreement whereby the
      Company received the exclusive license of software named NIB Version 1.0,
      which automatically actuates contextual menus in computer programs without
      the need to use or click a computer mouse button. In consideration, the
      Company issued 100,000 shares of common stock valued for financial
      accounting purposes at $6,000, the fair market value of the common stock
      on the effective date of the agreement based on concurrent cash offerings.

      During the six months ended June 30, 2003, an aggregate of $126,750 of the
      notes payable issued on May 15, 2002 were converted into 21,173,024 shares
      of common stock. The aggregate amounts converted and average conversion
      price per share during each month is as follows: January - $20,000 at
      $.0169; February - $10,000 at $.0145; March - $30,000 at $.0079; April -
      $16,050 at $.0035; May - $29,200 at $.0043; and June - $21,500 at $.0053.

      On April 21, 2003, the Company entered into an agreement with a consultant
      whereby the consultant is to analyze and provide advice and introductions
      as to both short and long-term strategic business plans, business
      development, marketing and communications. In consideration, the Company
      has agreed to issue 3,000,000 shares of common stock valued for financial
      accounting purposes at $24,000 (the fair market value of the common stock
      on the effective date of the agreement based on concurrent cash
      offerings), of which $6,000 has been recognized as consulting expense and
      $18,000 has been included in equity as deferred equity based expense. The
      chief executive officer has made available 3,000,000 shares of his common
      stock to be transferred to the consultant. These shares are to be repaid
      to him, and are reflected as to be issued at June 30, 2003.

                                        9
<PAGE>

                    TORBAY HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2004
                                   (UNAUDITED)


      During April 2003, the Company issued 1,000,000 shares of common stock,
      valued for financial accounting purposes at $10,000, the fair market value
      of the common stock, as consideration for legal services.

      During June 2003, the Company issued 583,333 shares of restricted common
      stock for options exercised for cash proceeds of $7,000.

NOTE 6 GOING CONCERN

      The accompanying condensed consolidated financial statements have been
      prepared on a going concern basis, which contemplates the realization of
      assets and the settlement of liabilities and commitments in the normal
      course of business. As reflected in the accompanying condensed
      consolidated financial statements, the Company has a net loss of $103,463
      and a negative cash flow from operations of $96,060 for the six months
      ended June 30, 2004 and a working capital deficiency of $409,109 and a
      stockholders' deficiency of $272,771 as of June 30, 2004. These factors
      raise substantial doubt about its ability to continue as a going concern.
      The ability of the Company to continue as a going concern is dependent on
      the Company's ability to raise additional funds to finance its operations.
      The condensed consolidated financial statements do not include any
      adjustments that might be necessary if the Company is unable to continue
      as a going concern.

      Management's plans include obtaining additional financing for which they
      are currently in active negotiations with several financing institutions
      and increasing sales of the Quill computer mouse and related software
      products.

                                       10
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD LOOKING STATEMENTS

Certain information contained in this Quarterly Report are forward-looking
statements (within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended).
Factors set forth that appear with the forward-looking statements, or in the
Company's other Securities and Exchange Commission filings, could affect the
Company's actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this Quarterly Report. In addition to statements, that
explicitly describe such risks and uncertainties, readers are urged to consider
statements labeled with the terms "believes," "belief," "expects," "intends,"
"anticipates" or "plans" to be uncertain and forward-looking. The
forward-looking statements contained herein are also subject generally to other
risks and uncertainties that are described from time to time in the Company's
reports and registration statements filed with the Securities and Exchange
Commission. In addition, prior financial performance and customer orders are not
necessarily indicative of the results that may be expected in the future and the
Company believes that such comparisons cannot be relied upon as indicators of
future performance. Additionally, the Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events. The
accompanying notes are an integral part of the condensed consolidated financial
statements.

OVERVIEW

We are a holding company for late-stage development, or early-stage commercial
companies, with opportunities in niche markets. We currently own two
subsidiaries, Designer Appliances Ltd., an inactive United Kingdom ("UK")
company, and Designer Appliances, Inc., a Delaware corporation, and will
actively seek additional and appropriate acquisitions, subject to the comments
below. We have acquired what we believe to be valuable intellectual property
rights, including an exclusive license on proprietary software and a UK patent
for a computer mouse that we believe to be beneficial to computer mice users
with regard to treating and preventing repetitive strain injury. The UK patent
is the basis for further patent applications that may enlarge the scope and
geography of our current patent position. We have achieved what we believe are
significant technical improvements to our products that we intend to protect
with further patents, although we can give no assurance that patent applications
will be filed or, if filed, that such applications will result in our obtaining
patents.

We sell and market the Quill Mouse computer mouse and software. The Company's
products are designed to justify a premium price in the upper and certain niche
sectors of our markets. There is no assurance that we will be able to continue
to manufacture or market these items.

                                       11
<PAGE>

The Company intends to market and sell only products that are designed to
attract a premium, niche or upscale market. Management believes that it has
identified several products, including the Quill "Grip-less" Mouse and Nib
"Click-less" software, in an under exploited opportunity in the computer,
household and domestic appliances markets. Because of the Company's precarious
financial condition and limited capital resources, it is currently limiting its
operations to the production and sale of the Quill Mouse and related software.

RESULTS OF OPERATIONS FOR THE 3 MONTHS ENDED JUNE 30, 2004 AND 2003

Gross Profit

For the 3 months ended June 30, 2004, the Company generated revenue from sales
of $82,527 compared to $31,926 for the 3 months ended June 30, 2003, an increase
of $50,601, or 158%. Cost of sales were $23,689 for the 3 months ended June 30,
2004, compared to $11,999 for the 3 months ended June 30, 2003, an increase of
$11,690. Gross profit was $58,838 or 71.3% of net revenues for the 3 months
ended June 30, 2004 relative to $19,927 or 62.4% of net revenues for the 3
months ended June 30, 2003.

The Company believes that the impact on gross profit, within the mix of product
sales between hardware products only, integrated hardware and software products
and, commencing in the third quarter, stand alone software products, will be
variable.

The Company believes that although it currently has limited marketing resources,
sales of the Company's products will continue to increase as a result of a
growing acceptance of the Company's products and the time that the Company's
management has spent in developing potential alliances as well as new marketing,
packaging and software product delivery and fulfillment systems.

Operating Expenses

Operating expenses increased to $189,208 for the 3 months ended June 30, 2004
from $163,555 for the three months ended June 30, 2003, an increase of $25,653
or 15.7%. The increase is attributable to increases in marketing, compensation
and administrative expenses, partially offset by a decrease in professional
fees. Included in administrative expense for 2004 is a non-cash charge of
$23,633 for filing fees related to the amortization of deferred equity based
compensation. This overall increase is due to increasing operations, sales and
marketing activity. The 3 months ended June 30, 2004 saw Company personnel
attend two exhibitions simultaneously with an increase in travel and related
expenses to investigate potentially strategic relationships. The Company
increased its spending on advertising in ergonomic magazines that are
distributed to ergonomic and human resource personnel in U.S. corporations in
addition to taking a full-page advertisement in the Mac Directory.

                                       12
<PAGE>

Other Income (Expenses)

For the 3 months ended June 30, 2004 expenses associated with financing costs
decreased compared to the 3 months ended June 30, 2003 due to the settlement of
convertible debentures in February 2004, offset by a finance charge resulting
from the sale of common stock below market value.

Net Loss

The Company incurred a net loss $180,311 for the 3 months ended June 30, 2004
relative to a net loss of $225,503 for the 3 months ended June 30, 2003. The
reduction in the net loss between the two periods was primarily due to an
increase in revenue from sales and the resulting gross profit contribution and a
reduction in interest and other costs related to the former debenture agreement,
partially offset by a finance charge resulting from the sale of common stock
below market value.

RESULTS OF OPERATIONS FOR THE 6 MONTHS ENDED JUNE 30, 2004 AND 2003

Gross Profit

For the 6 months ended June 30, 2004, the Company generated revenue from sales
of $159,537 compared to $43,627 for the 6 months ended June 30, 2003, an
increase of $115,910, or 266%. Cost of sales were $45,732 for the 6 months ended
June 30, 2004, compared to $20,462 for the 6 months ended June 30, 2003, an
increase of $25,270. Gross profit was $113,805 or 71.3% of net revenues for the
6 months ended June 30, 2004 relative to $23,165 or 53.1% of net revenues for
the 6 months ended June 30, 2003.

The Company believes that the impact on gross profit of the mix of product sales
between hardware products only, integrated hardware and software products and,
commencing in the third quarter, stand alone software products will be variable.

The Company believes that although it currently has limited marketing resources,
sales of the Company's products will continue to increase as a result of a
growing acceptance of the Company's products and the time that the Company's
management has spent in developing potential alliances as well as new
marketing, packaging and software product delivery and fulfillment systems.

Operating Expenses

Operating expenses decreased to $297,339 for the 6 months ended June 30, 2004
from $323,824 for the 6 months ended June 30, 2003, a decrease of $26,485 or
8.2%. The decrease is attributable to increases in marketing, compensation and
administrative expenses, offset by decreases in professional fees and consulting
fees. Included in administrative expense for 2004 is a non-cash charge of
$41,362 for filing fees related to the amortization of deferred equity based
compensation. Increases in operating expenses are due to increasing operations,
sales and marketing activity, including attendance at two exhibitions with an
increase in travel and related expenses to investigate potentially strategic
relationships. The Company increased its spending on advertising in ergonomic
magazines that are distributed to ergonomic and human resource personnel in U.S.
corporations in addition to taking a full-page advertisement in the Mac
Directory.

                                       13
<PAGE>

Other Income (Expenses)

For the 6 months ended June 30, 2004 expenses associated with financing costs
increased due to the expensing of certain deferred charges in February 2004 as a
result of the settlement of the convertible debentures, plus a finance charge
resulting from the sale of common stock below market value.

Net Loss

The Company incurred a net loss of $103,463 for the 6 months ended June 30, 2004
relative to a net loss of $449,784 for the 6 months ended June 30, 2003. The
reduction in the net loss between the two periods was made up of an increase in
revenue from sales and the resulting gross profit contribution, and a gain on
the settlement of debentures, partially offset by the expensing of certain
deferred charges and a finance charge resulting from the sale of common stock
below market value.

LIQUIDITY AND CASH POSITION

Operating Activities

For the 6 months ended June 30, 2004 and 2003 the Company used $96,060 and
$161,680, respectively, to fund operating activities. The decrease of $65,620 is
due to the decrease in net loss between the comparative periods. The use of cash
in 2004 is primarily due to the net loss for the period. For 2003, the use of
cash is primarily the result of the net loss of $449,784, partially offset by
non-cash charges of $208,145 and net changes in operating assets of $79,959.

Investing Activities

For the 6 months ended June 30, 2004 and 2003 the Company used $26,197 and
$1,650, respectively, to fund investing activities. These costs include capital
equipment purchase of computer equipment and on-going development costs for
software.


Financing Activities

For the 6 months ended June 30, 2004 the Company realized cash of $183,940 from
the private placement of restricted stock. The Company also paid $31,663 due
under the debenture settlement agreement. This compares to net cash receipts for
stock issuance and notes or loans payable in the 6 months ended June 30, 2003 of
$117,000.

                                       14
<PAGE>

The Company, including its subsidiaries, has incurred start-up costs, including
administrative costs and research and development costs, while realizing limited
operating revenue. Revenue commenced in late 2002. To date, the Company has been
and continues to be dependent upon funded operations, primarily from the
proceeds of sales of its securities and from loans to support the operating
losses it has incurred. These losses have reduced significantly as sales of the
Company's products continue to grow and margins have been held or enhanced. The
compliance costs associated with the Company being a reporting company under the
U.S. securities laws, including accounting and legal fees, continue to be a
predominant expense which contributes to the Company's operating losses.

The Company has had small but consistent increases in sales and revenue through
June 30, 2004. This increase is as a result of increased sales through existing
distribution routes, as management time and activities in the quarter ended June
30, 2004 have been predominantly in pursuit of strategic objectives that are
hoped to have an impact on future income.

The sales achieved have been through direct marketing programs, via the
Company's website and indirectly through distributor/resellers who themselves
have their own websites, catalogues and sales personnel. This strategy is part
of the development program that the Company has initiated for product and brand
recognition amongst the "professional ergonomic" industry. The Company has
developed an increasing reliance upon distributor/resellers and this business is
now in excess of 50% of its overall sales by value. This business also impacts
gross margin, as the distribution business requires discounts to the retail
selling price to be given to distributors.

Evidence for support of the opinion that the Company's marketing and customer
satisfaction initiatives are being achieved is borne out by the increasing sales
as described above. In addition, during the last quarter one Fortune 500 company
specified the Quill Mouse as a "standard option" and alternative to other mice
for its employees. This has resulted in the Quill Mouse being listed and
displayed on that company's internal website. Additionally a major oil company
has also commenced specification of our products including evaluation of our nib
click-less software for consideration as to "approval" for that company's
software profile. Orders and repeat orders from other major corporations,
including major utilities, healthcare, insurance companies and even large
computer manufacturers continue to provide optimism as to the success of the
Company's limited marketing activities and an expectation of future sales.

The Company's preparations for a retail packaged product are substantially
complete. Some reduction in gross margin may be necessary to achieve the pricing
incentives required by such outlets. The Company has also invested significantly
in the past quarter to streamline its software order fulfillment process. To
this end it has now developed a single version of its Nib Clickless software for
PC, compared to a demo version and a separate purchased version, activated by a
"software key code", supplied against each order. This means that this single
version of software can now be distributed with each mouse on the CD provided
with it. As a result, every mouse purchaser will be able to try the Clickless
software and the software key will be available in the packaging so that it is
no longer necessary to refer to the Company's website in order to obtain the
purchased software. The impact will have immediate order fulfillment upon
delivery, which is particularly important in anticipation of establishing a
retail presence. The same capability has also been developed, a single demo and
fully working version, for the McNib software for Macintosh.

                                       15
<PAGE>

Since inception through most of 2002, the Company focused on organizational
activities and research and development of the Company's products and the
development of marketing strategies. At the end of 2002, the Company commenced
production and shipment of its Quill Mouse product. Management estimates that it
would require between $6.5 million and $18.2 million over the first two years of
operations to support manufacturing and marketing operations, should the Company
commence production of all the products in the Company's intellectual property
rights portfolio. This portfolio includes vacuum cleaners, fans, heaters and
other intellectual property rights regarding domestic appliances. The Company
has no view or expectation of raising this level of financing, and so as a
consequence, will maintain and remain focused on developing sales of its Quill
Mouse and related products. Since 2002 the Company has introduced the following
new products:


o Introduced in 2002: Quill "grip-less" mouse, which allows the user to mouse
without the need to grip, which is indicated as a contributory factor in those
who develop functional impairments such as repetitive strain injury or carpal
tunnel syndrome.

o Introduced in 2003: Nib "click-less" software, which performs a high
percentage of computer mouse button clicks for its users and, subject to its
effective utilization, can aid those with functional impairment due to injury
and is also classified as Assistive Technology.

o Introduced in 2003: Nib Trial version: This is a 30-day active version of Nib
software which is freely downloaded from the Company's www.quillmouse.com
website.

o Introduced in 2004: The Quill Well Mouse mat: Completes the "system approach"
and helps to promote a permanent visual image of the Company's products in the
user's environment.

o Introduced in 2003: The Virtually Hands Free (VHF) mousing system: A bundle of
the Quill Mouse and Nib Software that allows the user to elect not to use most
of his muscles forward of his elbow, but still mouse and interact with his
computer in a conventionally recognized manner.

In March of 2004, following an independent review by a designer, health care
professionals and persons with arthritis, the Arthritis Foundation in the US
have given an Ease of Use commendation to the Virtually Hands Free Mousing
system and under a licensing agreement the Company is permitted to use the
Arthritis Foundation's Ease of Use logo as a graphic indication of the
commendation. This commendation makes the VHF System the first to be recognized
as being Assistive to persons with a clinical disability.

                                       16
<PAGE>

o Introduced in 2003: Carpal Management Systems I & II: A bundle of the VHF
system and one (System I) or two (System II) FlexTend orthotic gloves that
facilitate the use of a recognized and medically validated therapy exercise
glove with a mousing system that gives relief from the type of activity that
some consider to cause clawing of the hand due to mousing.

The Company entered into a co-marketing agreement with Balance Systems Inc,
maker of the FlexTend Orthotic Exercise Glove, to produce a hybrid product
offering called the Carpal Management System. It further developed software to
integrate the exercise routines into the Company's E-Quill-Liberator suite so
that the software provides a reminder for the exercises to be performed and
offers video images of the exercises. This and copies of the Nib Trail software
are now part of a CD that is distributed with Flextend glove shipped by Balance
Systems Inc.

o Introduced in 2004: Nib (for PC's) "click-less" software, with Gesture
technology, which enhances the previous version by allowing the selection of
different click types by the movement of the mouse cursor. To Gesture a Right
click the mouse cursor is moved to the right and back, to Gesture a double
click, to the left and back or to highlight or drag, downwards and back.

o Introduced in 2003: Nib (for PC's) Trial version with Gesture Technology: This
is a 30-day active version of Nib software which is freely downloaded from the
Company's www.quillmouse.com website.

o Introduced in 2004: McNib (for Macintosh computer) "click-less" software, with
the Gesture technology described above.

o Introduced in 2004: McNib (for Macintosh) Trial version with Gesture
Technology: This is a 30-day active version of McNib software which is freely
downloaded from the Company's www.quillmouse.com website.

o Introduced in 2004: The McVirtually Hands Free (McVHF) mousing system: A
bundle of the Quill Mouse and McNib Software with Gesture technology that allows
the user to elect not to use most of his muscles forward of his elbow, but still
mouse and interact with his computer in a conventionally recognized manner.

o Introduced in 2004 "The Clickless Web": This is a development on the Company's
Clickless software. The Clickless software, an application that performs mouse
button clicks for the user, is a computer resident program that requires
installation upon the user's computer following purchase. One element of the
computer resident software is the ability to click links and other functions
which enables interaction with the Internet, so as to be able to surf it and
store files etc., from it. This new development, as a product called among other
names, "The Clickless Web", takes the "web surfing and interacting" component of
the computer resident software, and, using a webpage application tool called
"Active X", allows these features to be accessed temporarily when a website,
empowered with the feature, is enabled. This type of application known as "tools
on demand" is considered a future direction and application of the Internet in
which there is less requirement for software to be loaded onto a computer, or
hand held device. Such applications as needed, are accessed on demand, and can
be potentially prepaid as a service, or rented for the duration of their use.
This feature could increase the portability of applications and also decrease
memory requirements and hard disk management of Internet connected devices. The
Clickless Web is the Company's first product in this potential growth area.
Prior to its launch and in keeping with its strategy, the Company filed a
world-wide patent application on this technology.

                                       17
<PAGE>

At this time there exist two demonstration sites for this technology:
www.theclicklessweb.com and www.theassistiveweb.com both of which link to an
identical page.

The Assistive Web site will be focused upon generating income from large
corporations such as banks, search engines, web retailers, assistive technology
websites and other high traffic websites. Pricing on this product has yet to be
established and no income from either of these websites can be anticipated as
yet.

o Planned for Introduction in 2004: SooToSee; currently in Alpha (in-house)
testing this software is designed as a dynamic magnification system to assist
those who need such assistance for observing computer screens, so as to enhance
their accuracy of pointing the computer mouse cursor, or help in reading small
text as is frequently the case with computer program menus and text on the
internet. This is as an aid to vision and does not replace the need of use of
spectacles, though it is envisaged that it will find application for those with
severe sight impairment. This is part of a new software development package.

o Planned for Introduction in 2004: SooToSpeak; currently in late development
stage. This software is designed as convert HTML text, such as is used on
Internet web pages and now more commonly in email systems and program menu
systems, into an audible speech output, utilizing existing and proprietary to
others, voice synthesis systems such as the "supplied as standard" Windows XP
voice "Microsoft SAM".

O What were formally described as Kissoft(TM) Products will be redefined under a
more simplified and coordinated name structure and will be aimed at the
Assistive Technology Market Sector in which disability and impairment might be
overcome by their use. The Assistive Technology Sector is a market segment
within the main computer product market. It is an area is subject to a product
focus by large players within the computer industry and includes specific
website segments from companies such as Apple Computers and Microsoft. The
Company has its products listed on both the Apple Computer Company's and the
Microsoft Corporation's Assistive Technology Product information pages, such
product listing being a service to their customers. This does not represent a
commercial relationship with these companies nor does it represent an
endorsement of out products by them.

                                       18
<PAGE>

SECTION 508 AMENDMENTS TO THE 1998 REHABILITATION ACT.

The General Services Administration (GSA) implemented a program that sets
standards for information technology so as to make such technology accessible to
those with special needs. The standards are applied under what is called Section
508,which are described in full at www.section508.gov details pertaining to our
products can be found at www.quillmouse.com under the heading GSA Section 508.
These standards include a section relating to input devices, such as computer
mice and under item 1194.26, subsection 2.0 a standard is prescribed for input
devices. Companies that consider their products to comply to such standards can
apply to have their products listed on the section508.gov website by completion
of disclosure forms that are then inspected and their information then listed if
considered compliant. The GSA then provides access to the product and company
information on the website. The Company, having evaluated the standard and
believing that its products complied, submitted its applications for the Quill
Mouse and the Virtually Hands Free Mousing System (mouse and software bundle),
which were subsequently processed and are now listed on the Section 508 website
as being compliant. At this time, to the Company's knowledge, there are no other
products listed on the website by other companies that may be considered to be
competitive to the Company's products, be they niche ergonomic computer mice or
mass-market supplier computer mice. The Company is therefore active in the
development of the potential such a listing has for opportunity to sell product
to the US Government under this provision. It should be understood that this
listing is not an endorsement or recommendation but an information source for
those who work or have needs in this are to help them make their decisions
thereby.

The other Market Sector that is sought to be addressed is the so called Baby
Boomers, those individuals born between 1946 and 1964, who are numerically large
in number, when considered as a single market and are now experiencing the
gradual deterioration of limbs and sensors as is commensurate with their age. A
survey commissioned by the Microsoft Corp. (www.microsoft.com/enable/research)
suggests that approximately 30M individuals in the US could benefit from
dexterity enhancing technology such as ours.

Scientific developments we believe are of significance to our business:
Researchers in the U.S. have developed an "animal model" for the investigation
of the pathology of repetitive use injuries or "Negligible Force" injuries as
they describe them. The lack of clinical validation, by way of recognition of
the pathological consequences of repetitive injuries, we believe, impacts the
opinions and therefore the actions of legislators, employers, insurers and
product manufacturers.

The initial results from 2 studies performed at Temple University, PA, so far
indicate clearly definable and potentially adverse changes in the pathology of
the bones and tissues of laboratory rats studied. The researchers attribute
these changes to repetitive reaching and grasping (gripping) movements and their
pathological analysis has observed significant and, in their view, detrimental
changes in histology and immunology. The results are early research, on
non-human subjects, using analyses that cannot, by their invasive nature, be
performed on live human subjects.

                                       19
<PAGE>

The arguments for and against the existence of repetitive strain injuries have
been on the basis of statistical argument and reporting of symptoms. This, much
like the smoking and lung cancer debate of the sixties (without implying the
same degree of significance) has afforded in many cases the opportunity for
denial.

While there is unlikely to be an early and measurable impact upon our business,
as a result of these studies and in anticipation that further study might
confirm these early findings, we believe popular opinion may be influenced
sufficiently that may lead to a changing market environment that could
ultimately be beneficial to this corporation.

Microsoft Assistive Technology Vendor Program (MATvp).

Designer Appliances Inc was recently enrolled into the MATvp program. The
primary purpose of this program is to decrease the time from development to
market for assistive technology products.


o As an interim and with an evolution of the brand and name of the Quill Mouse
in mind, following the grant of E-Quill-Liberator(R) as a registered trademark
of the Company, the Company's family of products will be protected under that
mark

Critical Accounting Policies and Estimates

Discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the amounts reported in the consolidated
financial statements and the accompanying notes.

On an on-going basis, we re-evaluate our estimates, including those related to
intangible assets, equity based compensation and litigation. We base our
estimates on experience and on various assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

COMPETITION:
It is the view of the board that all suppliers of computer mouse products are
potential competition. Within that principle it can be considered that there
exists direct competition, at this time considered to be companies marketing
other niche or small scale Ergonomic Products, and indirect competition or
mass-market retail competitors. The Company considers competition to be any
other company that can potentially divert sales dollars away from those that
could be spent on our products.

                                       20
<PAGE>

At this time the Company believes that it holds a unique position in the
marketplace, as it is the only provider of mouse products that do not require
grip to be used and has an associated software product that removes the need to
be clicked. Likewise, no other competitive products, either direct or indirect
in market presence, have Section 508 compliance claims or have been reviewed and
commended for ease of use for persons with arthritis. While this position could
change, it would require competitors to expend significant product development
costs and risk potential infringement of the intellectual property rights of the
Company. These rights are undergoing extension with additional patents having
been filed on both design and utility basis in the U.S. with the intention to
extend these and other applications contemplated into PCT or world-wide patents.

The employment of an IPR strategy is considered, though not guaranteed, to act
as a barrier to entry by other providers of computer mice. It is also considered
that the market environment, in regards to the general lack of recognition by
mouse manufacturers of health issues due to mouse product usage, precludes
entries by established organizations who are outside of the directly competitive
ergonomic sector. Their entry would likely raise more risk from the possible
litigious consequence of launching a "health conscious product as, by inference,
other and previous products could be viewed as "not health conscious". While
this is opinion and cannot be relied upon as to maintain the Company's advantage
in the future, it is considered that the opportunity for the Company to achieve
a market share of 5% of the total new and replacement U.S. computer mouse market
is possible from those impaired or having some form of disability under this
market scenario. It is also the Company's intent to work with any other who may
wish to license our technology.

It is also of interest to note the recent market messages of others with a
presence in the computer mouse sector. In recent press releases Logitech make
specific mention of "comfort: as part of their "product design".. Also in an
early August press release Mr. Gates of Microsoft made reference to the
Microsoft attention to, amongst other things, "natural interfaces" as
development areas in the future. There is no inference in these references other
than our perception of emerging market awareness amongst those who could be
competition, or allies, that comfort and interface design are factors for
consideration.

Since achieving a Section 508 listing and the Arthritis Foundation commendation,
the Company has redefined its mission, so as to be a leading supplier of
Assistive Technology Mouse products, an area that is not catered to by
mass-market suppliers. The Company believes that this sector is now on the
fringe of opportunity for supply into a bigger market, accessible by retail
distribution. A target of a 5% share of what is currently considered the annual
new and replacement U.S. computer mouse market would translate into
approximately 2 million mice sales per year, which on a worldwide basis could
relate to 10 million pieces per year. This does not contemplate earlier
retirement of computer mice, and therefore possible upside, due to an awareness
of the issues and our products, as a result of the Company's intended marketing
activities.

                                       21
<PAGE>

At this time there are no other competitors who state they are providers of a
Grip-less or Click-less computer mouse products, or that have a Section 508
listing or Arthritis Foundation commendation.

Revenues generated by sales of the QUILL and related products, where possible,
will be used to further develop QUILL sales until a cash flow positive, and
profit positive position, can be established at sustainable levels, thus
allowing the Company to access bank financing, and thereby reducing the extent
to which the Company must rely on other sources of external financing. In the
absence of sales, the estimated amount of working capital that the Company will
need, to expand the commercialization and distribution over the next year of the
QUILL Mouse at planned operational levels, is approximately $500,000. There are
no anticipated acquisitions of additional subsidiaries during the next 12-month
period.

It is recognized that revenues are not significant, and while they do not
provide for a sustainable business at current levels, it is the belief of
management that a sustainable business can be achieved, and that revenue
potential is significant upon an expansion of the current marketing effort, with
increased investment in that area.

GOING CONCERN QUALIFICATION

The Company's ability to continue its operations, in the absence of
significantly increased revenues from sales, is dependent upon receiving
sufficient additional capital financing until such levels of sales are achieved
to generate a positive cash flow. The Company may raise capital by the sale of
its equity securities, through an offering of debt securities, or from borrowing
from a financial institution. The Company's financial statements raise
substantial doubt about its ability to continue as a going concern if sufficient
revenues are not generated or additional funding is not acquired or alternative
sources of capital developed to meet its working capital needs

RECENT FINANCING -
During the six months ended June 30, 2004 the Company received financing from
the proceeds from the sale of common stock to directors, a product distributor
and existing shareholders in the amount of $183,940.

The Company is not aware of any other material trend, event or capital
commitment, which would potentially adversely affect liquidity.

ITEM 3. CONTROLS AND PROCEDURES

      As of June 30, 2004, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of June 30, 2004. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to June 30, 2004.

                                       22
<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      As of the date of this Form 10-QSB, we are not a party to any litigation,
and management has no knowledge of any threatened or pending litigation against
us.

      On February 17, 2004, we entered into a Redemption and Settlement
Agreement and Mutual General Release under which we redeemed all of our
outstanding 12% convertible debentures and related warrants by issuing 6,000,000
shares of our common stock to the debenture holders and agreed to pay $200,000
in cash payable in monthly installments of $16,667 commencing May 1, 2004.

      At the time of the execution of the settlement, we delivered to the former
debenture holders a fully executed Affidavit of Confession of Judgment
("Judgment"), in the amount of $350,000, plus accrued interest, late fees,
liquidated damages, and attorneys' fees and costs. The Judgment will be held in
escrow by Brune & Richard LLP pending our performance of the obligations set
forth in this Judgement. If we become in default of the Judgement, the former
debenture holders will become entitled to file the Judgment in the New York
State Supreme Court.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

      During the period from April 6, 2004 to April 30, 2004, the Company sold
an aggregate of 2,166,218 shares of its common stock for gross proceeds of
$126,940 and to settle a payable to an officer in the amount of $9,663. The
sales were all made in private placements transactions under an exemption from
the registration requirements of the Securities Act of 1933, as amended (The
"Act") afforded by Section 4(2) of the Act. The Company did not use a placement
agent in connection with such sales and did not pay any underwriting discounts
or commissions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                       23
<PAGE>

ITEM 5. OTHER INFORMATION

None.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

31.1 Certification of the Chief Executive Officer and Principal Financial
Officer of Torbay Holdings, Inc.pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32.1 Certification of the Chief Executive Officer and Principal Financial
Officer of Torbay Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

(b) Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 2004.


                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                                           TORBAY HOLDINGS, INC.

                                                        By: William Thomas Large
                            ----------------------------------------------------
                                                      Name: William Thomas Large
                                    Title: President and Chief Executive Officer
                  (Principal Executive Officer and Principal Accounting Officer)


Date: August 16, 2004

                                       24