U.S.
      SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D. C. 20549





FORM
      10-KSB





ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      fiscal year ended December 31, 2006





Commission
      File No.: 0-25417





TORBAY
      HOLDINGS, INC.


(Name
      of
      small business issuer in its charter)





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




P.O.
      Box
      1117, Long Beach, NY, 11561


(Address
      of principal executive offices)





516-747-5955


(Issuer's
      Telephone Number)





Securities
      Registered under Section 12(b) of the Exchange Act: None


Securities
      Registered under Section 12(g) of the Exchange Act:





Common
      Stock, $.0001 par value


(Title
      of
      Class)





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports) and (2) has been
      subject to such filing requirements for the past 90 days. Yes x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.o





Revenues
      for the issuer's fiscal year ended December 31, 2006 were $364,029.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, as of a specified date within the last 60 days: $1,047,463 based on the
      closing price of the Company's common stock on April 10, 2007 of $.008 per
      share. For purposes of the computation we consider all directors and holders
      of
      10% or more of our common stock to be affiliates. Therefore, the number of
      shares of our common stock held by non-affiliates as of April 10, 2007 was
      130,932,853.





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date. The Company had 152,837,900 shares of common
      stock outstanding as of April 10, 2007.





Transitional
      Small Business Disclosure Format (check one): Yes o No x







PART
      I





ITEM
      1.
      DESCRIPTION OF BUSINESS





General





We
      are a
      holding company for late-stage development, or early-stage commercial companies,
      with opportunities in niche markets. We have acquired what we believe to be
      valuable intellectual property rights, including an exclusive license on
      proprietary software and a United Kingdom patent for a computer mouse and
      subsequently been granted a US Patent upon the utility of a mouse design that
      we
      believe to be beneficial to computer mice users with regard to treating and
      preventing repetitive strain injury. We sell and market a computer mouse and
      software. Our products are designed to justify a premium price in the upper
      and
      certain niche sectors of our markets. Our management believes that they have
      identified several products, including the AirO 2 bic
      (formerly, the Quill) "Grip-less" Mouse and Nib "Click-less" software, in an
      under exploited opportunity in the computer, household and domestic appliances
      markets. We have also identified an opportunity in what we believe will be
      an
      emerging market in the use of microprocessor controlled devices for the purpose
      of relaxation. Because of our precarious financial condition and limited capital
      resources, we are currently limiting our operations to the production and sale
      of the AirO 2 bic
      Mouse
      and related software. However, when and if our financial condition warrants
      it,
      we plan to acquire controlling interests in late-stage development or
      early-stage commercial companies, with opportunities in niche
      markets.




Our
      executive offices are located in Long Beach, New York 11561. Our mailing address
      is P.O. Box 1117, Long Beach, New York 11561 and our telephone number is
      516-747-5955.





We
      were
      incorporated on March 24, 1999 as a Delaware corporation named Acropolis
      Acquisition Corporation. We changed our name to Torbay Holdings, Inc. on July
      14, 1999. On October 26, 1999, Torbay Acquisition Corporation (“TAC”), a
      reporting company under the Securities Exchange Act of 1934, as amended (the
      “Exchange Act”), merged into us. In the merger we issued our common stock to the
      former stockholders of TAC and our common stock automatically became registered
      under the Exchange Act as a result of such transaction.





Products





AirO 2 bic
      Computer Mouse and Nib, McNib & Brakemoor Software





Our
      two
      main product areas are a computer mouse which we market under the name
      AirO 2 bic
      Mouse
      and software, including Nib software for PC’s, McNib software for Macintosh
      computers and Brakemoor anti-fatigue software. The AirO 2 bic
      Mouse
      is a “grip-less” computer mouse which allows the user to move a cursor to any
      point on the screen without having to grip the mouse with the muscles of the
      hand. The AirO 2 bic
      Mouse
      design maintains the hand in a "functional neutral" position, one in which
      the
      muscles of the hand are kept under a constant, but reduced tension, allowing
      for
      normal blood flow and resulting in less fatigue. We believe that no comparable
      product is offered by any other company.




3





The
      Nib/McNib Software AirO 2 bic
      enables the user to operate any mouse or input device without having to click
      mouse or device buttons. This helps reduce the mechanical burden of pressing
      mouse buttons. A combination of our mouse and software is bundled together
      as
      the "VHF system" (virtually hands free) to allow the user to control the cursor
      through minimal use of the fingers muscles of the hand. The Virtually Hands
      Free
      mousing system allows for conventional mousing techniques without the need
      for
      muscle activity forward of the elbow. This enables those with reduced dexterity
      of most kinds to be able to use the full features of their software, including
      and especially an easier and fuller Internet experience. With the VHF System,
      upper arm muscles are used to move and point the mouse. There is no need to
      grip
      or click. Some persons with tremors may find that they can avoid unintentional
      clicking, since using the VHF System they are able to maneuver without fingers
      being in close proximity to mouse buttons.





The
      AirO 2 bic
      Mouse
      will help to alleviate the strain of computer mouse usage by untwisting the
      wrist and avoiding what is called static posture. This is when a constant grip
      is maintained, the excessive use of which is now reported as correlating with
      computer mouse related injuries. We believe that in many cases the VHF System
      can break the cycle of a user receiving therapy and then returning to work
      to
      perform a task, like mousing, that is likely to negate or delay the impact
      of
      the benefits of the treatment just received. We believe that with our products
      many people can heal sooner, saving pain and money.





Some
      experts consider that using an ordinary mouse for more than 20 hours a week
      will
      likely lead to an injury within 2-5 years. Muscles that are tensed and then
      relaxed over short time intervals as when typing are considered as at less
      risk,
      as they are in what is called a dynamic posture. When muscles are tensed blood
      is squeezed out and they can require up to 50 times more oxygen. Only when
      a
      muscle relaxes can full blood flow resume and oxygen concentrations return
      to an
      "at rest" level. As with all physical work and in the absence of other factors
      that can affect some individuals, while dynamic postures can and do cause hands
      to tire, they are less likely to lead to injury if that posture were the only
      one employed while computing.





Muscles
      that are tensed and held tense for longer periods of time (maybe minutes or
      more; continuous and contiguously) are said to be in static posture. This is
      the
      posture that has to be used to some degree in order to grip an ordinary mouse
      including other so-called "vertical mice". This "non-neutral" posture is the
      basis for an expectation of injury and that is supported by the observation
      that
      many computer users start with problems in their mousing arm.




4





As
      a
      result of mousing, flexibility in the wrist can be reduced and the ability
      to
      twist the wrist decreases. The body then compensates by sticking out the elbow,
      which, due to a wrist twist limitation, mechanically re-orientates the hand
      so
      as to allow it to be placed flat on a palm down mouse. This "postural
      compensation" as it is called, in forcing the arm/elbow further away from the
      body, places extra "physical load" on the shoulder joint that can develop into
      conditions across the neck and shoulders that are not always associated with,
      but are often due to, mousing palm down.





We
      are
      continuing to develop our hardware product range and in September 2006 announced
      the development of a new design of computer mouse that overcame the limitations
      of requiring hand specific dexterity and also allows users to choose to work
      in
      the conventional palm down posture, or in the functionally neutral upright
      posture.





Planned
      for launch in 2007 when it will be called the MorphTM mouse, we believe our new
      mouse will help manage injuries typically associated with using a computer
      mouse
      such as cumulative trauma disease or repetitive strain injury and carpal tunnel
      syndrome.





Since
      2002 we have introduced the following additional new products:





·
      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.





·
      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.





·
      Introduced in 2003: Nib Trial version: This
      is a 30-day active version of Nib software which is freely downloaded from
      our
      website.





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





·
      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.





·
      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.




5





·
      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, the mouse is moved downward and back.





·
      Introduced in 2004: Nib (for PC’s) Trial
      version with Gesture Technology: This is a 30-day active version of Nib software
      which is freely downloaded from our website.





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





·
      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 our www.quillmouse.com website.





·
      Introduced in 2004: The McVirtually Hands
      Free mousing system for Macintosh (“McVHF”): 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.





·
      In March 2004, following an independent
      review by a designer, health care professionals and persons with arthritis,
      the
      Arthritis Foundation in the U.S. have given an Ease of Use commendation to
      the
      Virtually Hands Free Mousing system and under a licensing agreement we are
      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.





·
      Introduced in 2004 “The Clickless Web”:
      This is a development on our 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 our first product in this
      potential growth area. Prior to its launch and in keeping with our strategy,
      we
      filed a world-wide patent application on this technology.




6





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.





In
      November 2004 the E-Quill-AirObic product was introduced that provided customers
      with a color choice option that in the directors opinion matches current system
      sales trends of Black or White. Renamed in 2005 to simply the AirO 2 bic
      mouse





Section
      508 Amendments to the 1998 Rehabilitation





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.aeerobicmouse.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 and 1194.23 standards are 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 its mouse
      and the Virtually Hands Free Mousing System (mouse and software bundle), which
      were subsequently processed and as of April 2003, were listed on the Section
      508
      website under the Company’s assertions as to compliance.





To
      our
      knowledge, there have been no other products listed on the website by other
      companies that may be considered to be competitive to our products, be they
      niche ergonomic computer mice or mass-market supplier computer mice. We were
      therefore active in the development of the potential such a listing has for
      opportunity to sell product to the U.S. 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.





In
      December 2005 we introduced Brakemoor Anti.Fatigue software. Brakemoor calls
      up
      a break that then seeks to de-fatigue by re-aerating users, relaxing them and
      then allowing them to re-equilibrate their muscle biochemistry. This is a patent
      pending technique which we believe is unlike any other break timer software
      available in the market today. It applies what are called the 3 R's of
      Anti.FatigueTM, Re-Aeration, Relaxation and Recovery. This is an orchestrated
      process that recognizes and deals with fatigue at the physiological level.
      We
      believe that dealing with fatigue in this way is as important as tool design
      as
      a user may be able to use more fatigue inducing tools if the user is prepared
      to
      stop and take a break more often.




7





Other
      Products we may Market in the Future





Our
      focus
      since our inception in 1999 has been upon hardware (computer peripheral) and
      software products within the computer market sector. We intend to sustain this
      sole subject to the availability of sufficient funds to develop other product
      ideas we have.




Marketing





We
      sell
      our products through distributors as well as directly to the consumer. We have
      adopted a strategy of "Marketing the Science" in marketing our products in
      order
      to raise market awareness of the issues of computer mouse injury and of the
      assistive technology benefits of our products. We maintain a website
      (www.aerobicmouse.com) which we sell our products directly to consumers and
      provide information to our distributors including the translation into German
      and Swedish of informative and instructional documents.





We
      believe that being seen as the market innovator and an authority on issues
      relating to the use of computer mice, brand recognition can be achieved and
      sales to professional bodies, therapists and ergonomists can be achieved. We
      also anticipate that such recognition will enable us to form strategic
      relationships with other companies who do not possess such expertise, but have
      a
      co-market existence.





We
      believe that our strategy has lead to our mouse products being reviewed by
      a
      number of magazines and the placement of technical articles in corporate
      ergonomic media.





Our
      marketing initiatives are focused on the Assistive Technology and the Functional
      Impairment markets.





Another
      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 30 million individuals in the U.S. could benefit
      from dexterity enhancing technology such at ours. We believe the following
      scientific developments 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.




8





The
      initial results from 2 studies performed at Temple University, in Philadelphia
      Pennsylvania, 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.





In
      a more
      recent development scientist in Japan are now suggesting a correlation between
      intensive computer usage and the development of glaucoma, an eye condition.
      This
      supports even further the evidence that extensive and extended computer work
      is
      being increasingly recognized to have unforeseen health impact upon computer
      users.





In
      November 2006 the Mayo Clinic in Rochester published a research paper indicating
      that Carpal Tunnel Syndrome (CTS), a condition commonly associated with
      extensive computer use, was as a consequence of injury due to finger usage.
      The
      significance of this being that until now CTS has been considered and treated
      as
      a medical condition and not as a potential industrial injury.





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 create a greater
      computer user health consciousness that ultimately may be beneficial to
      us.





Microsoft
      Assistive Technology Vendor (“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.





Hewlett-Packard
      Assistive Technology Listing





The
      Hewlett-Packard Company ("HP") has listed all of our products in their Small
      and
      Medium Business catalogue under the section of Assistive Technology. We believe
      that this is a significant development as it is the first trading relationship
      established with a major and mainstream computer supplier.





Seasonality
      of Business





In
      the
      limited time that the Company has sold its products it appears that product
      sales have declined during main holiday season periods, most noticeably during
      the winter holiday period.




9





Competition





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.





At
      this
      time the Company believes that it holds a unique position in the computer mouse
      marketplace, as it is the only provider of mouse products that do not require
      grip to be used and which have an associated software product that removes
      the
      need for the mouse to be clicked.





Competition
      in the conventional computer mouse sector is typically global by most product
      providers. The major producers of computer mice include, but are not limited
      to,
      Logitech, Kensington and Microsoft.





In
      the
      "ergonomic" market, the 3M ergonomic mouse and the Contour Design mouse products
      are the major computer mouse products.





Intellectual
      Property





We
      hold a
      United Kingdom utility patent (No. BG2328496) on the AirO 2 bic
      Mouse
      and have applied for a U.S. patent on this product. Patent applications on
      the
      AirO 2 bic
      Mouse
      have also been made in other countries.





In
      the
      United States we have been granted, and hold, a utility patent No
      7,145,548 entitled "Biomechanical Low Load Computer Mouse”. The patent was
      granted on December 5, 2006.





We
      have
      applied for an additional United States utility patent on our clickless web
      software, further mouse and keyboard designs and software that prescribes
      relaxation techniques on microprocessor controlled devices.




The
      British and U.S. patents expire 20 years after the date of
      grant.




Employees





We
      have
      two full-time employees, including our executive officers, neither of whom
      have
      employment agreements with us. We have also retained two part-time consultants.





Risk
      Factors




10





An
      investment in our common stock is speculative in nature and involves a high
      degree of risk. You should carefully consider the following risks and the other
      information contained in this report. The price of our common stock could
      decline due to any of these risks, and you could lose all or part of your
      investment. You also should refer to the other information included in this
      report, including the financial statements and related notes thereto. In
      addition, the risks described below are not the only ones facing us. We have
      described only the risks we consider material. However, there may be additional
      risks that we view as not material or of which we are not presently
      aware.





If
      any of the events described below were to occur, our business, prospects,
      financial condition or results of operations or cash flow could be materially
      adversely affected. When we say that something could or will have a material
      adverse effect on it, we mean that it could or will have one or more of these
      effects.





Risks
      Related to Our Business:





*We
      have had losses since our inception. Our loss for the year ended December 31,
      2006 was substantial and more than for the year ended December 31, 2005,
      indicating that there is still a significant risk we may never become
      profitable* ***.***





** We
      had a
      net loss of $668,210 for the fiscal year ended December 31, 2006 relative to
      a
      net loss of $555,070 for the fiscal year ended December 31, 2005. Sales revenues
      year on year increased marginally (6%), but our net loss increased 2006 from
      2005, primarily as a result of a consulting fees and compensation.





*There
      is uncertainty as to our continuation as a going concern.*





Our
      audited financial statements for the year ended December 31, 2006 reflect a
      net
      loss of $668,210, a working capital deficiency of $342,480 and a stockholders’
deficiency of $291,285. These results and conditions raise substantial doubt
      about our ability to continue as a going concern. Our ability to continue our
      operations, in the absence of significantly increased revenues from sales and
      a
      resulting positive cash flow, is dependent upon receiving sufficient additional
      equity and/or debt financing. If we continue to incur losses and fail in
      obtaining additional funding, we may not be able to fund continuing business
      operations, which could lead to the curtailment or closure of some or all of
      our
      operations.





*Funding
      for our capital needs is not assured, and we may have to curtail our business
      if
      we cannot find adequate funding.*





During
      the year ended December 31, 2006 we received $75,000
      from the sale of 11,538,461 shares of common stock and sold 100,000 shares
      of
      common stock for cash proceeds of $2,500. We also received $20,000 during 2006
      from a sale of common stock which occurred in 2005.  During
      2006, we repriced 8,000,000 common stock purchase warrants with exercise prices
      ranging from $0.07 to $0.10. The repricing reduced the exercise price of the
      warrants to $0.01. The holder of the warrants then exercised 7,500,000 of the
      warrants and we received cash proceeds of $75,000. We
      currently have no legally binding commitments with any third parties to obtain
      any material amount of additional equity or debt financing, except that subject
      to certain conditions and limitations (including that the market price of our
      common stock is at least 50% more than the exercise price of the warrant for
      a
      period of 30 days before exercise), we may require the holder of outstanding
      warrants to purchase an aggregate of 7.5 million shares of our common stock
      to
      exercise such warrants. We may not be able to obtain any additional financing
      on
      acceptable terms or at all. Our ability to obtain debt financing may be
      particularly unlikely because we have no assets to use as collateral security
      for the loan. As a result, we may not have adequate capital to implement future
      expansions, maintain our current levels of operation or to pursue strategic
      acquisitions. Our failure to obtain sufficient or any additional financing
      could
      result in the delay or abandonment of some or all of our development, plans,
      which could harm our business and the value of our common
      stock.




11





*Our
      current and potential competitors, some of whom have greater resources and
      experience than we do, may develop products and technologies that may cause
      demand for, and the prices of, our products to decline.*





The
      general appliances industry as well as the general computer products industry
      include numerous companies which have achieved substantially greater market
      share than we have, have longer operating histories, have larger customer bases,
      and have substantially greater financial, development and marketing resources
      than we do. Although at this time there are no other competitors who state
      they
      are providers of a Grip-less or Click-less computer mouse products as we do,
      we
      expect our competition to intensify as new research and development is going
      on.
      Existing or future competitors may develop or offer products that are comparable
      or superior to ours at a lower price, which could negatively affect our
      business, results of operations and financial condition.





*As
      a
      developer in the computer appliance industry, we may experience substantial
      cost
      overruns in manufacturing and marketing products, and we may not have sufficient
      capital to successfully complete the development and marketing of any of our
      products.*





In
      the
      general appliances industry and general computer products industry the
      commercial success of any product is often dependent on factors beyond the
      control of the company attempting to market the product, including, but not
      limited to, market acceptance of the product and whether or not retailers
      promote the products through prominent shelving and other methods of promotion.
      We may experience substantial cost overruns in manufacturing and marketing
      our
      products, and may not have sufficient capital to successfully complete any
      of
      our projects. We may not be able to manufacture or market our products because
      of industry conditions, general economic conditions and competition from
      existing or new manufacturers and distributors.





*We
      are largely dependent on key personnel, the loss of which could harm our
      prospects.*




12





We
      depend, to a large extent, on the abilities and participation of our current
      management team, including William Thomas Large, our President and Chief
      Executive Officer. The loss of the services of any of our key personnel, for
      any
      reason, may have a material adverse effect on our prospects. There can be no
      assurance in this regard nor any assurance that we will be able to find a
      suitable replacement for such persons. We carry a $1.0 million life insurance
      policy covering Mr. Large, but do not carry life insurance for any other key
      personnel *.*





*If
      we
      are not able to contract with retail outlets to sell our products, we may not
      be
      able to continue to operate.*





We
      market
      our AirO 2 bic
      Mouse
      and Software products through distributors, upscale department stores, boutiques
      and designer outlets. We do not currently have any arrangements or agreements
      with any such stores to carry our products once produced. We may not be able
      to
      locate retail outlets to stock our products, and even if we are successful
      in
      doing so, such outlets may not give our products sufficient marketing support
      such as shelving space prominence.





*If
      we
      do not continue to succeed in establishing effective sales, marketing and
      distribution systems, we will not expand our business sufficiently to achieve
      profitability.*





To
      increase market awareness and expand our products, we
      must
      establish effective sales and marketing for our product offerings. To date,
      we
      have a limited number of personnel devoted to sales of these products, and
      have
      made only limited sales ,
      primarily based on efforts by members of management. We intend to expand our
      customer base through sales of the AirO2bic
      Mouse
      and related products. Our future profitability depends, in part, on increasing
      sales of our products abovementioned and developing new products and having
      the
      marketing resource or the development of marketing
      partnerships.





*We
      may be sued for product liability and our product liability insurance may not
      be
      adequate.*





** We
      carry
      product liability insurance coverage in the aggregate amount of $1 million
      for
      our subsidiary, Designer Appliances, Inc. There can be no assurance, however,
      that such insurance policies will be sufficient to fully indemnify us against
      any asserted claims or that such insurance will continue to be
      available.





While
      we
      have limited product liability insurance to protect against this risk, adequate
      insurance coverage may not be available at an acceptable cost, if at all, in
      the
      future and a product liability claim or product recall could materially and
      adversely affect our business. Inability to obtain sufficient insurance
      coverage at an acceptable cost or otherwise to protect against potential product
      liability claims could prevent or inhibit the commercialization of our products.
      If we are sued for any injury allegedly caused by our products, our liability
      could exceed our total assets and our ability to pay the
      liability.




13





*We
      may not be able to protect our patents, trademarks and proprietary and/or
      non-proprietary rights, and, we may infringe upon patents, copyrights,
      trademarks and proprietary rights of others.*





Notwithstanding
      the pending registration of certain trade names with the United States Patent
      and Trademark Office, and the grant of a patent and trade marks by the United
      Kingdom Patent Office, we may not have the resources to or otherwise be able
      to
      enforce our rights against infringers. If we are not able to prevent competitors
      from using the same or similar names, marks, concepts or appearances, our
      business and financial conditions may be negatively impacted.





Our
      software products were developed by independent contractors. However, we have
      no
      confidentiality agreements, invention assignment agreements, conflict of
      interest declarations or non-competition agreements with the contractors. The
      lack of the above mentioned agreements raises the risk of potential infringement
      of our intellectual property rights by others including the independent
      contractors and may limit our ability to enforce our intellectual property
      rights.





*We
      may, in the future, issue additional shares of our common stock which would
      reduce the percentage ownership of our existing shareholders.*





Our
      certificate of incorporation, as amended, authorizes the issuance of 250,000,000
      shares of common stock, par value $.0001 per share, and 20,000,000 shares of
      preferred stock, par value $.0001 per share.





The
      future issuance of all or part of our remaining authorized common stock may
      result in substantial dilution in the percentage of our common stock held by
      our
      then existing shareholders. Our existing shareholders do not have any preemptive
      rights to purchase shares that may be offered. The value of any common or
      preferred stock we may issue in the future shall be determined by our Board
      of
      Directors and may be less than the current market value or book value of such
      shares. The issuance of common stock for future services or acquisitions or
      other corporate actions may have the effect of diluting the value of the shares
      held by our investors, and may lower the price of our common stock.





*No
      Cash Dividends Are Expected in the Foreseeable Future.*





We
      have
      never declared or paid any cash dividends .
      We do
      not intend to
      declare or pay cash dividends in the foreseeable future. We intend to retain
      all
      earnings, if any, that we may realize in the future to finance our operations.
      The payment of any future dividends will be subject to the discretion of the
      Board of Directors and will depend upon the Company's results of operations,
      financial position and capital requirements, general business conditions,
      restrictions imposed by financing arrangements, if any, legal restrictions
      on
      the payment of dividends and other factors the Board of Directors deems
      relevant.




14





*Since
      our common stock is listed on the OTC Bulletin Board, which can be a volatile
      market, our investors may realize a loss on the disposition* *of
      their shares.*





Our
      common stock is quoted on the OTC Bulletin Board, which is a more limited
      trading market than the
      Nasdaq SmallCap Market. Timely and accurate quotations of the price of our
      common stock may not always be available and trading volume in this market
      is
      relatively small. Consequently, the activity of trading only a few shares may
      affect the market and result in wide swings in price and in volume. The price
      of
      our common stock may fall below the price at which an investor purchased shares,
      and an investor may receive less than the amount invested if the investor sells
      its shares. Our shares of common stock may be subject to sudden and large falls
      in value, and an investor could experience the loss of the investor’s entire
      investment.





*Investors
      may not be able to enforce securities or other claims against one of our
      officers and directors or against our assets.*




One
      of
      our officers and directors has a primary residence outside the United States.
      We
      anticipate that a substantial portion of the assets that may be developed or
      acquired by us will be located outside the United States and, as a result,
      it
      may not be possible for investors to effect service of process within the United
      States upon such person, or to enforce against our assets or against such person
      judgments obtained in United States courts predicated upon the liability
      provisions, and most particularly the civil liability provisions, of the United
      States securities laws or state corporation or other laws.





*Risks
      Related to Our Common Stock:*





*Because
      the Price of Our Common Stock May Vary Widely, When You Decide to Sell It,
      You
      May Encounter a Delay or Have to Accept a Reduced Price.*





The
      price
      of our common stock may fluctuate widely, depending on many factors. Some of
      these factors have little to do with our operating results or the intrinsic
      worth of our products. For example, the market value of our common stock may
      be
      affected by the trading volume of the shares, announcements of expanded business
      by us or our competitors, operating results of our competitors, general trends
      in the general computer products industry, general price and volume fluctuations
      in the stock market, acquisition of related companies or variations in quarterly
      operating results. Also, if the trading market for our common stock remains
      limited, that may exaggerate changes in market value, leading to more price
      volatility than would occur in a more active trading market. As a result, if
      you
      want to sell your common stock, you may encounter a delay or have to accept
      a
      reduced price.





*If
      we
      fail to remain current in our reporting requirements, we could be removed from
      the OTC Bulletin Board which would limit the ability of broker-dealers to sell
      our securities and the ability of stockholders to sell their securities in
      the
      secondary market.*




15





Companies
      trading on the OTC Bulletin Board, such as us, must be reporting issuers under
      Section 12 of the Exchange Act and must be current in their reports under
      Section 13 of the Exchange Act, in order to maintain price quotation privileges
      on the OTC Bulletin Board. If we fail to remain current on our reporting
      requirements, we could be removed from the OTC Bulletin Board. As a result,
      the
      market liquidity for our securities could be severely adversely affected by
      limiting the ability of broker-dealers to sell our securities and the ability
      of
      stockholders to sell their securities in the secondary market.





*Our
      directors and executive officers beneficially own approximately 15.0% of our
      common stock; their interests could conflict with yours; significant sales
      of
      stock held by them could have a negative effect on our stock
      price.*





As
      of
      April 11, 2007, our executive officers, directors and affiliated persons owned
      approximately 32% of our outstanding common stock. As a result, our executive
      officers, directors and affiliated persons may have significant influence
      in:





·
            electing
                or defeating the election of our
                directors;





·
            amending
                or preventing amendment of our certificate of incorporation or
                bylaws;





·
            effecting
                or preventing a merger, sale of assets or other corporate transaction;
                and





·
            controlling
                the outcome of any other matter submitted to the stockholders for
                vote.





As
      a
      result of their ownership and positions, our directors and executive officers
      collectively are able to significantly influence all matters requiring
      stockholder approval, including the election of directors and approval of
      significant corporate transactions. In addition, sales of significant amounts
      of
      shares held by our directors and executive officers, or the prospect of these
      sales, could adversely affect the market price of our common stock. Management's
      stock ownership may discourage a potential acquirer from making a tender offer
      or otherwise attempting to obtain control of us, which in turn could reduce
      our
      stock price or prevent our stockholders from realizing a premium ** over
      our
      stock price *.*





*Our
      common stock is subject to the "Penny Stock" rules of the SEC and the trading
      market in our securities is limited, which makes transactions in our stock
      cumbersome and may reduce the value of an investment in our
      stock.*





The
      Securities and Exchange Commission (the “SEC”) has adopted Rule 15g-9 which
      establishes the definition of a "penny stock," for the purposes relevant to
      us,
      as any equity security that has a market price of less than $5.00 per share
      or
      with an exercise price of less than $5.00 per share, subject to certain
      exceptions. For any transaction involving a penny stock, unless exempt, the
      rules require:




16





·
            that
                a broker or dealer approve a person's account for transactions in
                penny
                stocks; and





·
            the
                broker or dealer receive from the investor a written agreement to
                the
                transaction, setting forth the identity and quantity of the penny
                stock to
                be purchased.





In
      order
      to approve a person's account for transactions in penny stocks, the broker
      or
      dealer must:





·
            obtain
                financial information and investment experience objectives of the
                person;
                and





·
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of evaluating the risks
                of
                transactions in penny stocks.





The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prescribed by the SEC relating to the penny stock market,
      which, in highlight form:





·
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and





·
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.





Disclosure
      also has to be made about the risks of investing in penny stocks in both public
      offerings and in secondary trading and about the commissions payable to both
      the
      broker-dealer and the registered representative, current quotations for the
      securities and the rights and remedies available to an investor in cases of
      fraud in penny stock transactions. Finally, monthly statements have to be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks.





Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
      "penny stock" rules. This may make it more difficult for investors to dispose
      of
      our common stock and cause a decline in the market value of our stock.





ITEM
      2.
      DESCRIPTION OF PROPERTY




17





Our
      prior
      leases for residential and office space expired in 2006 and were not renewed.
      We
      have entered into a one year lease for office space and to serve as a residence
      for an officer of the Company located in Long Beach, New York The lease expires
      on April 30, 2008 and provides for a monthly rental of $3,500.





We
      believe that our property is adequate for our current and immediately
      foreseeable operating needs. We do not have any policies regarding investments
      in real estate, securities or other forms of property.





ITEM
      3.
      LEGAL PROCEEDINGS





As
      of
      April 11, 2007, we are not a party to any litigation, and management has no
      knowledge of any threatened or pending litigation against us.





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





None.





PART
      II





ITEM
      5.
      MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES





Our
      common stock was authorized to trade on December 23, 2000 on the
      over-the-counter market with quotations available on the OTC Electronic Bulletin
      Board under the symbol "TRBY." No trades occurred until January 3,
      2001.





The
      following table sets forth the range of high and low bid quotations of our
      common stock for the periods indicated. The prices represent inter-dealer
      quotations, which do not include retail markups, markdowns or commissions,
      and
      may not represent actual transactions.





Year
      Ended December 31, 2005





First
                Quarter
            
            $
            0.13
            
            $
            0.01Second
                Quarter
            
            $
            0.12
            
            $
            0.05Third
                Quarter
            
            $
            0.09
            
            $
            0.03Fourth
                Quarter
            
            $
            0.07
            
            $
            0.03




Year
      Ended December 31, 2006





First
                Quarter
            
            $
            0.05
            
            $
            0.018Second
                Quarter
            
            $
            0.03
            
            $
            0.011Third
                Quarter
            
            $
            0.019
            
            $
            0.008Fourth
                Quarter
            
            $
            0.015
            
            $
            0.008





18





Security
      Holders





At
      April
      10, 2007, there were 152,837,900 shares of our common stock outstanding, which
      were held of record by 403 stockholders, not including persons or entities
      who
      hold the stock in nominee or "street" name through various brokerage
      firms.





Dividends





The
      payment of dividends, if any, is to be within the discretion of the Company’s
      Board of Directors. The Company presently intends to retain all earnings, if
      any, for use in its business operations and accordingly, the Board of Directors
      does not anticipate declaring any dividends in the near future.





Dividends,
      if any, will be contingent upon the Company’s revenues and earnings, capital
      requirements and financial condition.





Equity
      Compensation Plan Information





As
      of
      April 10, 2007, the Company does not have any equity compensation
      plans.





Transfer
      Agent





Stocktrans,
      Inc., with offices at 44 West Lancaster Avenue, Ardmore, Pennsylvania 19003
      is
      the registrar and transfer agent for the Company’s common stock.




Penny
      Stock Regulations





The
      SEC
      has adopted regulations which generally define “penny stock” to be an equity
      security that has a market price of less than $5.00 per share. The Company’s
      common stock falls within the definition of penny stock and is subject to rules
      that impose additional sales practice requirements on broker-dealers who sell
      such securities to persons other than established customers and accredited
      investors (generally those with assets in excess of $1,000,000, or annual
      incomes exceeding $200,000 or $300,000, together with their spouse).





For
      transactions covered by these rules, the broker-dealer must make a special
      suitability determination for the purchase of such securities and have received
      the purchaser’s prior written consent to the transaction. Additionally, for any
      transaction, other than exempt transactions, involving a penny stock, the rules
      require the delivery, prior to the transaction, of a risk disclosure document
      mandated by the SEC relating to the penny stock market. The broker-dealer also
      must disclose the commissions payable to both the broker-dealer and the
      registered representative, current quotations for the securities and, if the
      broker-dealer is the sole market-maker, the broker-dealer must disclose this
      fact and the broker-dealer’s presumed control over the market. Finally, monthly
      statements must be sent disclosing recent price information for the penny stock
      held in the account and information on the limited market in penny stocks.
      Consequently, the “penny stock” rules may restrict the ability of broker-dealers
      to sell the Company’s common stock and may affect the ability of investors to
      sell our common stock in the secondary market.




19





Recent
      Sales of Unregistered Securities





We
      did
      not issue any securities during the fourth quarter of the fiscal year ended
      December 31, 2006, except that we issued 538,461  shares
      of
      our common stock  to
      Financial Alchemy, LLC to complete a financing we had entered into prior to
      such
      quarter and 1,000,000 shares of our common stock to a consultant for an
      agreement entered into in September 2006.





Each
      of
      such issuances was made in transactions exempt from the registration
      requirements of the Act under an exemption afforded by Section 4(2) of the
      Act
      for shares issued in transactions not involving a public offering.




ITEM
      6.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





OVERVIEW





We
      are a
      holding company for late-stage developmental, 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 comments below. We have
      acquired valuable intellectual property rights including an exclusive license
      on
      proprietary software and a UK patent for a computer mouse that is thought to
      be
      beneficial to computer mice users with regards to the area of treatment and
      prevention of repetitive strain injury. The UK patent is the basis for further
      patent applications that may result in an extent of the scope and geography
      of
      our current patent position. We have achieved what we believe are significant
      technical developments that will be patent protected, though there is no
      guarantee that such developments will proceed to a patent.





We
      sell
      and market the AirO 2 bic
      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, through our active subsidiary,
      will be able to continue to manufacture or market these items.





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 AirO 2 bic
      "Grip-less" Mouse and Nib "Click-less"
      software and Brakemoor Anti.Fatigue software as 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
      AirO 2 bic
      Mouse
      and related software.




20





RESULTS
      OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005





Gross
      Profit





For
      the
      year ended December 31, 2006, the Company generated revenue of $364,029 compared
      to $343,478 for the year ended December 31, 2005, an increase of $20,551 or
      6.0%.





The
      single digit sales growth for the year ended December 31, 2006 reflects our
      limited resources for marketing.




Gross
      profit was $266,867 or 73.3% of net revenues for the year ended December 31,
      2006 relative to $250,484 or 72.9% of net revenues for the year ended December
      31, 2005. The small increase in gross profit for 2006 as a percentage of net
      revenues reflects relative increases in sale of higher margin
      products.





Operating
      Expenses





For
      the
      year ended December 31, 2006, operating expenses increased $154,441 or
      20.8%  from
      $743,674 for the year ended December 31, 2005 to $898,115 for the year ended
      December 31, 2006 The increase in the Company's operating expenses resulted
      primarily from increases in consulting costs of $145,500 and compensation costs
      of $143,657, offset by decreases in selling expenses of $36,232, professional
      fees of $54,799 and overall general and administrative expenses of $43,685.
      Consulting fees include services provided in connection with relaxation
      techniques to be deployed in software and media products. Included in consulting
      and compensation expense are non-cash charges for stock based compensation
      aggregating $415,340.





Other
      Expense





For
      the
      year ended December 31, 2006, interest and financing expense was $36,962,
      compared to $61,880 for the year ended December 31, 2005. The primary component
      of the expense was a non-cash charge of $34,174 and $45,058 for 2006 and 2005,
      respectively, resulting from the repricing of certain of our common stock
      purchase warrants.




21





Net
      Loss





The
      Company incurred a net loss of $668,210 for the year ended December 31, 2006
      relative to a net loss of $555,070 for the year ended December 31, 2005 The
      $113,140 increase in net loss is primarily attributable an increase in operating
      expenses, partially offset by an increase in gross profit and a decrease in
      interest and finance costs.





Liquidity
      and Cash Position





Operating
      Activities





For
      the
      years ended December 31, 2006 and 2005, the Company used $167,808 and $341,959,
      respectively, to fund operating activities. For the year ended December 31,
      2006, a loss of $668,210 was partially offset by non-cash charges of $38,235
      of
      depreciation and amortization expense, $449,514 of stock based compensation
      and
      financing expense and by the net change in operating assets and liabilities.
      For
      the year ended December 31, 2005, a loss of $555,070 was partially offset by
      non-cash charges of $49,648 of depreciation and amortization expense, $164,413
      of stock based compensation and financing expense and the net change in
      operating assets and liabilities





Investing
      Activities





For
      the
      years ended December 31, 2006 and December 31, 2005, the Company used $1,758
      and
      $12,305, 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
      years ended December 31, 2006 and 2005, the Company realized cash of $197,750
      and $323,501, respectively, in connection with financing activities. For 2006,
      the financing activities included the receipt of $172,500 from the issuance
      of
      common stock and $37,000 in advances from related parties, offset by repayments
      of $26,750. We also received a working capital advance of $15,000 from a third
      party. For 2005, we received $314,550 in proceeds from common stock sales,
      $78,529 in loans and advances from related parties and others, offset by
      repayments of $6,250.We paid $63,328 in principal payments relating to a
      settlement of convertible debentures.




LIQUIDITY
      AND CAPITAL RESOURCES





The
      Company, including its subsidiaries, during its development stage incurred
      start-up costs, including administrative costs and research and development
      costs, while realizing limited operating revenue. Revenue commenced in late
      2002
      and while it has continued to grow it is not yet to the point that the Company
      is independent of funding its operations without the proceeds of sales of its
      securities and from loans.




22








The
      Company has achieved sales, though small to date relative to its costs of
      operations and maintaining its listing, with revenues that have been consistent
      through December 31, 2006 Sales have been made through direct marketing
      programs, via its website and indirectly through an increasing number of
      distributor/resellers who themselves have their own websites. Our strategy
      has
      been to develop product and brand recognition amongst the "professional
      ergonomic" industry ahead of investigating “niche” assistive technology markets
      in the broader retail sector of the computer peripheral business. The Company
      is
      also focused upon any opportunity to increase its sales to the U.S. Government
      following clarification that Section 508 Law does require computer mice to
      meet
      the prevailing standards.





We
      believe that the Company will require funding of $600,000 for its computer
      mouse
      related business, in order to introduce its proposed new products and maintain
      its SEC reporting status. Discussions are taking place in pursuit of these
      objectives.





Our
      access to such new markets will be dependent upon our ability to partner with
      organizations that have a presence and reputation within those sectors. While
      the Company has developed an increasing reliance upon distributor/resellers
      (as
      this business is now in excess of 50% of our overall sales by value), Even
      though such reliance may reduce our margins, we believe that such reliance
      is
      likely yield a greater return because of increased sales and a reduction in
      general and administrative expenses we enjoy as a result of the implementation
      of this strategy. As the possibility of entrance into the retail computer market
      sector is considered further, reductions in gross margin may be necessary to
      achieve the pricing incentives required by such outlets. We do not believe
      that
      there is any significant seasonality in the sale of our products.





At
      the
      end of 2002 the Company commenced production and shipment of its mouse product
      and has maintained a clear focus upon developing that business and has no plans
      to launch other products outside of the computer peripheral market at this
      time.
      It continues to seek to strengthen its Intellectual Property Rights (“IPR”)
      assets in the area of computer peripherals. To date the Company's intellectual
      property rights portfolio includes vacuum cleaner, fans, heaters and other
      intellectual property right bearing domestic appliances. The Company will remain
      focused on developing sales of its Mouse and Software related products and
      developing other “parallel” product technologies into products.




Contractual
      Obligations




We
      conduct our operations from facilities occupied pursuant to a lease that
      commenced March 1, 2007 and which expires on April 30, 2008. Future minimum
      lease payments are as follows: 2007, $35,000; 2008, $14,000.




23





Going
      Concern





The
      Company’s consolidated financial statements as of December 31, 2006 and for the
      year then ended 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 such consolidated financial
      statements, for the year ended December 31, 2006 the Company has a net loss
      of
      $668,210 and a negative cash flow from operations of $167,808, and as of
      December 31, 2006 the Company had a working capital deficiency of $342,480
      and a
      stockholders' deficiency of $291,285. These factors raise substantial doubt
      about the Company’s 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 and implement its business plan. The 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
      AirO 2 bic
      computer mouse.





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 accounting principles generally accepted in the United States of America.
      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
      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.





Accounts
      Receivable





Accounts
      receivable consist primarily of receivables from individuals and distributors.
      The Company records a provision for doubtful accounts, when appropriate, to
      allow for any amounts which may be unrecoverable and is based upon an analysis
      of the Company's prior collection experience, customer creditworthiness, and
      current economic trends.





Inventory





Inventory
      is stated at the lower of cost or market using the first-in first-out method.
      Cost includes expense of freight-in transportation. Inventory consists entirely
      of finished goods, which include left-handed and right-handed computer mice
      for
      sale to customers. The inventory is produced by an overseas vendor using the
      Company's equipment.




24





Revenue
      Recognition





The
      Company’s products are sold directly over the internet and through
      distributorships. Products sold over the internet require complete payment
      via
      credit card prior to shipment. Products sold through distributors require the
      distributor to submit a purchase order and payment (according to terms and
      pricing approved by the Company) prior to shipment. Accordingly, revenues from
      sales over the internet and through distributors are recognized when the product
      is shipped as the price has been determined and collectibility has been
      reasonably assured. The Company provides a warranty on goods for two years
      from
      the date of sale. The Company has not established a warranty reserve as of
      December 31, 2006 or 2005 since the amount is not material based on past
      experience.





Website
      and Computer Software Costs





The
      Company follows the AICPA's Statement of Position 98-1, "Accounting for the
      Costs of Computer Software Developed or Obtained for Internal Use" (“SOP 98-1”),
      in accounting for its website and software costs. Accordingly, costs to obtain
      computer software from third parties obtained for internal use have been
      capitalized and amortized over their estimated useful life of 5 years.
      Enhancements to software are amortized over an estimated useful life of 2 years.
      Costs incurred in operating a website that have no future benefits are expensed
      in the period in which they are incurred. Costs incurred in operating the
      website that have a future benefit are capitalized in accordance with SOP 98-1
      and amortized over the respective future periods that are expected to benefit
      from the changes.





Stock
      Based Compensation





On
      January 1, 2006, we adopted the fair value recognition provisions of Financial
      Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
      (“SFAS”) No. 123(R), Accounting for Stock-Based Compensation, to account for
      compensation costs under our stock option plans. We previously utilized the
      intrinsic value method under Accounting Principles Board Opinion No. 25,
      Accounting for Stock Issued to Employees (as amended) (“APB 25”). Under the
      intrinsic value method prescribed by APB 25, no compensation costs were
      recognized for employee stock options because the option exercise price equaled
      the market price on the date of grant. Prior to January 1, 2006, if applicable,
      we only disclosed the pro forma effects on net income and earnings per share
      as
      if the fair value recognition provisions of SFAS 123(R) had been utilized.
      We
      did not have any grants of employee stock options during the years ended
      December 31, 2006 or 2005.





In
      adopting SFAS No. 123(R), we elected to use the modified prospective method
      to
      account for the transition from the intrinsic value method to the fair value
      recognition method. Under the modified prospective method, compensation cost
      is
      recognized from the adoption date forward for all new stock options granted
      and
      for any outstanding unvested awards as if the fair value method had been applied
      to those awards as of the date of grant. We had no outstanding unvested awards
      at the adoption date and we had no outstanding unvested awards during the 2005
      comparative period.




25




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.




Common
      stock issued as compensation is recorded based on the fair value of the stock
      issued on the date of grant.




SECTION
      508 AMENDMENTS TO REHABILITATION ACT.





The
      General Services Administration (the “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.aerobicmouse.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, which relates to subsection 1193.26- 2.0 a standard is
      prescribed for input devices. Companies that consider their products to meet
      the
      standards can apply to have their products listed within the “Buy Accessible”
section of the section508.gov website and also list a Voluntary Product
      Accessibility Template (“VPAT”) by which government purchasing officials can
      perform their own due diligence so as to ensure the purchases they make are
      Section 508 compliant. The GSA Section 508 Group 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 its hardware and software products which were subsequently
      processed and listed on the Section 508 website.





Section
      508 compliance has been a requirement of system purchases, typically large
      contracts over $2,500, since July, 2001 whereas “Micropurchases”- purchases less
      than $2,500 and typically by credit card -- have been exempt from Section 508
      compliance. This exemption was due to expire on October 1, 2004, thereby making
      all purchases to require Section 508 compliance. This exemption was extended
      on
      October 5, 2004 until April 1, 2005 and was designated the “final extension.”
The Company was made aware by third parties that its products were no longer
      listed in the Section 508 website. We had not been advised of their removal
      and
      upon inquiry we were told that computer mice were not considered as requiring
      Section 508 compliance and that our listing, by then some 18 months, was
      erroneous.





Following
      review by various bodies, at a meeting in December, 2005 the Company’s
      interpretation of Section 508 law, that computer mice were subject to the
      standards, was confirmed and the Company’s products were re-listed on the Buy
      Accessible section of the www.section508.gov website.




26





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 products to the U.S.
      Government either directly or in partnership with other vendors who sell to
      the
      government. It should be understood that this listing is not an endorsement
      or
      recommendation by the U.S. Government, but an information source for those
      must
      meet the compliance with Section 508 law.





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  arketing 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.





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 intellectual property rights strategy is considered, but 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.




27





Since
      achieving a Section 508 listing, MATvp membership with Microsoft and an
      Arthritis Foundation commendation, the Company has redefined its mission to
      be a
      leading supplier of Universally Designed Assistive and Accessible Technology
      computer input device 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. Research
      conducted on behalf of Microsoft and found at www.microsoft.com/enable/research under
“Key Findings” on the first page states.





“57%
      of
      computer users are likely or very likely to benefit from the use of accessible
      technology.





44%
      of
      computer users use some form of accessible technology.





Users
      seek solutions to make their computers easier to use, not for solutions based
      on
      their health or disability.





Making
      accessibility options easier to discover and use will result in computers that
      are easier, more convenient, and more comfortable for computer users.”





To
      provide an example of the market kinetic in computer input devices: 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 marketing activities.





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





Revenues
      generated by sales of the mouse and software products, where and when possible
      will be used to further develop sales until a cash flow positive and profit
      positive position can be established at sustainable levels, thus allowing the
      Company to access bank financing, 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 its products at
      planned operational levels, is approximately $600,000 .





ITEM
      7.
      FINANCIAL STATEMENTS




28





The
      consolidated audited financial statements for the year ended December 31, 2006
      are included in this Annual Report on Form 10-KSB following Item
      14.





ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.





ITEM
      8A.
      CONTROLS AND PROCEDURES





We
      maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and
      Rule 15d-15(e) under the Exchange Act) that are designed to ensure that
      information required to be disclosed in our periodic reports filed under the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods specified in the SEC's rules and forms, and that such information is
      accumulated and communicated to our management, including our principal
      executive/financial officer, to allow timely decisions regarding required
      disclosure.





As
      of
      December 31, 2006, our management conducted a further evaluation under the
      supervision of our Chief Executive Officer and our Chief Financial Officer
      of
      the effectiveness of the design and operation of our system of disclosure
      controls and procedures pursuant to the Exchange Act. Based upon that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that the Company's disclosure controls and procedures were effective, as of
      the
      date of their evaluation, for the purposes of recording, processing, summarizing
      and timely reporting material information required to be disclosed in reports
      filed by the Company under the Exchange Act.




ITEM
      8B.  OTHER
      INFORMATION





Reports
      on Form 8-K.





During
      the period commencing the last quarter of the period covered by this Report
      until the date of filing of this Report, we did not file and were not required
      to file any Current Reports on Form 8-K.





PART
      III





ITEM
      9.
      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





The
      following are the executive officers and directors of the Company as of April
      10, 2007.




Name
            
            Positions
            
            AgeAlexander
                Gordon Lane
            
            Chairman
                of the
            
            65Board
                of Directors,SecretaryWilliam
                Thomas Large
            
            CEO,
                President and Director
            
            51Thomas
                A. Marchant
            
            Director
            
            59





29




Alexander
      Gordon Lane, 65, Secretary and a Director of Torbay Holdings, Inc. has served
      in
      such capacities since October 1999. Mr. Lane has been a Financial Consultant
      since 1998 and continues in such capacity. Mr. Lane has been in the financial
      services business for over 30 years. From 1976 to 1983 he served as Treasurer
      of
      Grindlays Bank PLCC, New York, and in 1983 he was a founding member of
      International Money Brokers which was acquired by Traditional North America.
      From 1993 to 1998, he was a principal of Intercontinental Exchange Partners,
      New
      York, as a capital markets broker in the interest and foreign exchange areas.
      Mr. Lane has an aeronautics degree from Wandsworth Technical College in
      London.





William
      Thomas Large, 51, has been President and Chief Executive Officer since September
      2000 and a Director of Torbay Holdings, Inc. and Chief Executive Officer of
      Designer Appliances since October 1998. From October 1996 until October 1998,
      Mr. Large was Chairman, Chief Executive Officer, a Director and a major
      stockholder of DeltaTheta Ltd., a heating and cooling technology company in
      Cheshire, England. From February 1997 until September 1999, Mr. Large also
      served as a director of DeltaMonitor Ltd., a medical devices company in
      Cheshire, England. From December 1996 until June 1997, Mr. Large also served
      as
      a director of SoundAlert Ltd., a company that manufactured emergency vehicle
      sirens. From September 1994 until July1996, Mr. Large was a Director of
      AromaScan plc, a publicly listed instrumentation and technology company in
      Cheshire, England. Mr. Large graduated from Manchester Metropolitan University,
      in Manchester, England, and is the author or co-author of eight articles and
      two
      books relating to biochemical analysis.





Thomas
      A.
      Marchant, 59, has served as a member of our board of directors since July 11,
      2002. Mr. Marchant, joined Ford Motor Company in 1985 as Financial Sales Manager
      of Ford Credit Canada. Mr. Marchant directed a sales and marketing operation
      to
      institutional investors in the Commercial Paper and Medium Term Note Markets.
      In
      1991Mr. Marchant transferred to Ford World Headquarters in Dearborn, Michigan
      and assumed responsibility for consolidation and launch of the Canadian Treasury
      funding operation. Prior to joining Ford, Mr. Marchant held various positions
      with Greenshields Incorporated, one of Canada's foremost investment banking
      firms, First National Bank of Chicago, Grindlays Bank and Merrill
      Lynch.




All
      directors hold office until the next annual meeting of stockholders and until
      their successors are elected. Officers are elected to serve, subject to the
      discretion of the Board of Directors, until their successors are appointed.
      Directors do not receive cash compensation for their services to us as
      directors, but are reimbursed for expenses actually incurred in connection
      with
      attending meetings of the Board of Directors.





Section
      16 Reporting




30





No
      person
      who, during the year ended December 31, 2006, was a director, officer or
      beneficial owner of more than ten percent of the Company's Common Stock (which
      is the only class of securities of the Company registered under Section 12
      of
      the Exchange Act failed to file on a timely basis, reports required by Section
      16 of the Exchange Act during the most recent fiscal year or prior years, except
      William Thomas Large and Thomas Marchant who have not filed any reports under
      Section 16(a) of the Exchange Act.





Code
      of
      Ethics





The
      Company has adopted a Code of Ethics applying to its executive officers which
      is
      filed as Exhibit 14.1 to this Annual Report.





ITEM
      10.
      EXECUTIVE COMPENSATION





Summary
      Compensation Table





The
      following Summary Compensation Table sets forth summary information as to
      compensation received by the Company's Chief Executive Officer and Chairman
      for
      their services to the Company during the fiscal years ended December 31, 2005
      and December 31, 2006. No executive officer of the Company or any other person
      received total compensation from the Company of $100,000 or more during such
      fiscal years.





Name
                and Principal Position
            
            Year
                Ended
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
                Awards ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Non-Qualified
                Deferred Compensation Earnings ($)
            
            All
                Other Compensation ($)
            
            Total
                ($)William
                Thomas Large, CEO, CFO and Director
            
            
            12/31/2006
              12/31/2005
            
            
            59,723
              39,298
            
            
            0
              0
            
            
            128,000
                (1
              32,000(1
            )
              )
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            187,723
              71,298Gordon
                Lane, Chairman
            
            
            12/31/06
              12/31/05
            
            
            26,603
              32,001
            
            
            0
            
            
            74,240(2
              18,560(2
            )
              )
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            100,843
              50,561





(1)
      In
      2005 the Company issued to Mr. Large a certificate for 8,000,000 shares of
      common stock valued at $.02 per share. The Company expensed 20% of the value
      of
      such shares in 2005 (representing an aggregate of $32,000) and the remaining
      80%
      of the value of such shares (representing an aggregate of $128,000) in
      2006.





(2)
      In
      2005 the Company issued to Mr. Lane a certificate for 4,640,000 shares of common
      stock valued at $.02 per share. The Company expensed 20% of the value of such
      shares in 2005 (representing an aggregate of $18,560) and the remaining 80%
      of
      the value of such shares (representing an aggregate of $74,240) in
      2006.





Compensation
      of Directors




31





During
      the fiscal year ended December 31, 2006, no officer or director received any
      type of compensation from our Company for serving as a director. No arrangements
      are presently in place regarding compensation to directors for their services
      as
      directors or for committee participation or special assignments.





Employment
      Agreements





We have
      not entered into any employment agreements with our executive officers or other
      employees to date. We may enter into employment agreements with them in the
      future.





ITEM
      11.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.





The
      following table sets forth as of April 10, 2007, certain information with
      respect to the beneficial ownership of the voting securities by (i) any person
      or group with more than 5% of the Company’s securities, (ii) each director,
      (iii) each executive officer and (iv) all executive officers and directors
      as a
      group.




Name
                and
            
            
            
            Amount
                andAddress
                of
            
            Title
                of
            
            Nature
                of Beneficial
            
            Percent
                ofBeneficial
                Owner
            
            Class
            
            Ownership
                (1)
            
            Class
                (2)Nutmeg
                Group, LLC
              3646
                Commercial Avenue
              Northbrook,
                Illinois 60062
            
            
            Common
                Stock
            
            
            19,526,389(3
            )
            
            12.2
            %Financial
                Alchemy, LLC
              c/o
                Nutmeg Group, LLC
              3646
                Commercial Avenue
              Northbrook,
                Illinois 60062
            
            
            Common
                Stock
            
            
            11,538,461
            
            
            7.5
            %Alexander
                Gordon Lane
            
            
            Common
                Stock
            
            
            5,783,827
            
            
            3.8
            %P.O.
                Box 1117Long
                Beach, New York 11561William
                Thomas Large
            
            
            Common
                Stock
            
            
            15,599,582(4
            )
            
            10.2
            %P.O.
                Box 1117Long
                Beach, New York 11561Thomas
                A. Marchant
            
            
            Common
                Stock
            
            
            1,521,638
            
            
            1.0
            %P.O.
                Box 1117Long
                Beach, New York 11561All
                Directors and Officers of the Company
            
            
            Common
                Stock
            
            
            22,905,047
            
            
            15.0
            %as
                a group (3 persons)




32




*
      Less
      than 1%





(1)
      In
      general, beneficial ownership includes those shares that a person has the power
      to vote, sell, or otherwise dispose. Beneficial ownership also includes that
      number of shares, which an individual has the right to acquire within 60 days
      (such as stock options) of the date this table was prepared. Two or more persons
      may be considered the beneficial owner of the same shares. "Voting power" is
      the
      power to vote or direct the voting of shares, and "investment power" includes
      the power to dispose or direct the disposition of shares. The inclusion in
      this
      section of any shares deemed beneficially owned does not constitute an admission
      by that person of beneficial ownership of those shares.





(2)
      Computed based upon a total of 152,837,900 shares of common stock outstanding
      as
      of April 10, 2007.





(3) Includes
      7,500,000 shares of our common stock issuable upon exercise of stock purchase
      warrants which are currently exercisable. Nutmeg
      is
      a U.S. Virgin Islands limited liability company of which Randall Goulding and
      Michael Montaigne each own 50% of the outstanding membership interests. Nutmeg
      Group, LLC is managed by a Board of four persons, including Randall Goulding,
      Michael Montaigne, Brandon Goulding and Randi White. Such persons share the
      voting and investment power over the securities owned by Nutmeg, including
      the
      Company's securities.





(4)
      Includes 120,000 shares of our common stock owned by Mr. Large's minor children.
      Such figure does not include 3,000,000 shares of our common stock issuable
      to
      Mr. Large to reimburse Mr. Large for 3,000,000 shares transferred by him to
      a
      consultant in August 2003 in payment of an obligation of the
      Company.





ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





During
      2006, the spouse of an officer advanced $37,000 to us for working capital
      purposes. Interest on the advances accrues at 9.5% per year and may be paid
      in
      the form of our common stock. We repaid $8,000 in cash during 2006. Accrued
      interest at December 31, 2006 is $2,788 and is included in accounts
      payable.





During
      2006 we repaid $18,750 of prior advances from the above individual.





During
      the period from February 8, 2007 to March 8, 2007 the spouse of an officer
      advanced an additional $17,000 to us for working capital purposes. Interest
      on
      the advances accrues at 9.5% per year and may be paid in the form of our common
      stock.




ITEM
      13.
      EXHIBITS





The
      following exhibits are either filed as part of this report or are incorporated
      herein by reference:





2.1
      Agreement and Plan of Merger between Torbay Acquisition Corporation and Torbay
      Holdings, Inc. (1)




33





3.1
      Certificate of Incorporation of Torbay Holdings, Inc. and Certificate of
      Amendment thereto filed in June 1999 (2)





3.2
      Certificate of Amendment to Certificate of Incorporation of Torbay Holdings,
      Inc. filed on October 18, 2005 (3)





3.3
      By-Laws of Torbay Holdings, Inc. (4)





4.1
      Certificate of Designation with respect to Series 1 Convertible Preferred Stock
      of Torbay Holdings, Inc. (5)





4.2
      Form
      of Common Stock Certificate (6)





4.3
      Warrant to Purchase 500,000 Shares of Common Stock, dated August 24, 2004
      (7)





4.4
      Warrant to Purchase 2,500,000 Shares of Common Stock dated December 16, 2004
      (8)





4.7
      Warrant to Purchase 2,000,000 Shares of Common Stock dated December 16, 2004
      (9)





4.8
      Warrant to Purchase 2,000,000 Shares of Common Stock dated December 16, 2004
      (10)





10.1
      Manufacturing Agreement between the Company and Dynapoint, Inc. dated April
      16,
      2002 (11)





10.2
      Lease, dated February 8, 2007 between Barbara Leiter  and
      the
      Company.*




10.4
      Nutmeg Term Sheet for $50,000 Financing (12)





10.5
      Nutmeg Term Sheet for $30,000 Financing (13)





10.6
      Agreement, dated December 16, 2004 between the Company and The Nutmeg Group
      (14)





10.7
      Consulting Agreement dated September 9, 2006 between the Company and Scott
      Frickson.*





14.1
      Code
      of Ethics (15)





21.1
      List
      of subsidiaries*





23.1
      Consent of Holtz Rubenstein Reminick LLP.*




34





23.2
      Consent of Weinberg & Company, P.A.*





31.1
      Certification of Chief Executive Officer and Principal Financial
      Officer.*





32.1
      Certification of Chief Executive Officer and Principal Financial
      Officer.*





*Filed
      herewith.





(1)
      Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form
      8-K, filed with the SEC on November 12, 1999 (the "1999 8-K").





(2)
      Incorporated by reference to Exhibit 3.1 to the 1999 8-K.





(3)
      Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form
      10-KSB, filed with the SEC on April 28, 2006 (the “2005 10-KSB”).





(4)
      Incorporated by reference to Exhibit 3.2 to the 1999 8-K.





(5)
      Incorporated by reference to Exhibit 3.4 to the 1999 8-K.





(6)
      Incorporated herein by reference to Exhibit 4.2 to the Registration Statement
      on
      Form SB-2 (Registration No. 333-93847), filed with the SEC on December 30,
      1999.





(7)
      Incorporated herein by reference to Exhibit 4.4 to the Registration Statement
      on
      Form SB-2 (Registration No. 333-122773), filed with the SEC on February 11,
      2005
      (the “2005 SB-2”).




(8)
      Incorporated herein by reference to Exhibit 4.6 to the 2005 SB-2.





(9)
      Incorporated herein by reference to Exhibit 4.7 to the 2005 SB-2.





(10)
      Incorporated herein by reference to Exhibit 4.8 to the 2005 SB-2.





(11)
      Incorporated by reference to Exhibit 10.3 to our Form 10-KSB filed with the
      SEC
      on April 29, 2002.





(12)
      Incorporated by reference to Exhibit 10.4 to the 2005 SB-2.





(13)
      Incorporated by reference to Exhibit 10.5 to the 2005 SB-2.





(14)
      Incorporated by reference to Exhibit 10.6 to the 2005 SB-2.





(15)
      Incorporated by reference to Exhibit 14.1 to the 2005 10-KSB.





ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES




35





INDEPENDENT
      AUDITOR FEES





The
      following is a summary of the fees billed to us by (a) Weinberg & Company,
      P.A. (“Weinberg”) for professional services rendered for the fiscal year ended
      December 31, 2005 and (b) Holtz Rubenstein Reminick LLP for the fiscal year
      ended December 31, 2006:




Fee
                Category
            
            Fiscal
                2006
            
            Fiscal
                2005Audit
                fees
            
            $
            57,760
            
            $
            76,585Tax
                fees
            
            
            0
            
            
            0Other
                fees
            
            
            0
            
            
            0Total
                fees
            
            $
            57,760
            
            $
            76,585





Audit
      Fees. Consists of aggregate fees billed for professional services rendered
      for
      the audit of our consolidated financial statements and review of the interim
      consolidated financial statements included in quarterly reports and services
      that are normally provided by our auditors in connection with statutory and
      regulatory filings or engagements.





Tax
      Fees.
      Consists of aggregate fees billed for professional services for tax compliance,
      tax advice and tax planning. These services include assistance regarding federal
      and state tax compliance.





Other
      Fees. Consists of fees for products and services other than the services
      reported above. There were no management consulting services provided in fiscal
      2006 or 2005.





We
      do not
      currently have an Audit Committee. Our full Board of Directors considers whether
      the provision of these services is compatible with maintaining the auditor's
      independence, and has determined such services for fiscal 2005 and 2006 were
      compatible.





BOARD
      OF
      DIRECTORS POLICY ON PRE-APPROVAL OF SERVICES OF INDEPENDENT
      AUDITORS





The
      Board
      of Directors’ policy is to pre-approve all audit and permissible non-audit
      services provided by the independent auditors on a case-by-case basis. These
      services may include audit services, audit-related services, tax services and
      other services.


36




SIGNATURES





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


TORBAY
              HOLDINGS,
              INC.Dated:
              May 2, 2007
            By:
            /s/ William
              Thomas LargePresident
              and Chief Executive Officer
              Principal
                Executive Officer and
              Principal
                Accounting Officer




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Name
            
            Title
            
            Date/s/
                Alexander Gordon Lane
            
            Chairman,
              Secretary
            
            May
              2, 2007Alexander
                  Gordon Lane
            
            and
                a Director/s/
                William Thomas Large
            
            President,
              Chief
            
            May
              2, 2007William
                  Thomas Large
            
            Executive
                Officer and Director/s/
                Thomas A. Marchant
            
            Director
            
            May
              2, 2007Thomas
                A. Marchant




37




TORBAY
      HOLDINGS, INC. AND SUBSIDIARIES





TABLE
      OF
      CONTENTS





Page(s)F-1
            
            REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMF-2
            
            REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMF-3
            
            CONSOLIDATED
                BALANCE SHEET AS OF DECEMBER 31, 2006F-4
            
            CONSOLIDATED
                STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS FOR THE YEARS
                ENDED
                DECEMBER 31, 2006 AND 2005F-5-F-6
            
            CONSOLIDATED
                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE YEARS ENDED
                DECEMBER 31, 2006 AND 2005F-7
            
            CONSOLIDATED
                STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND
                2005F-8-F-18
            
            NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2006 AND
                2005








**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders of
 Torbay
        Holdings, Inc. and Subsidiaries:
 
 We
        have
        audited the accompanying consolidated balance sheet of Torbay Holdings, Inc.
        and
        Subsidiaries (the "Company") as of December 31, 2006, and the related
        consolidated statements of operations, stockholders’ deficiency and
        comprehensive loss, and cash flows for the year then ended. These consolidated
        financial statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these consolidated financial
        statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit also includes examining,
        on a test basis, evidence supporting the amounts and disclosures in the
        financial statements, assessing the accounting principles used and significant
        estimates made by management, as well as evaluating the overall financial
        statement presentation. We believe that our audit provide a reasonable basis
        for
        our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of the Company as of December
        31, 2006, and the results of its operations and its cash flows for the year
        ended December 31, 2006, in conformity with accounting principles generally
        accepted in the United States of America.
 
 As
        discussed in Note 1 to the consolidated financial statements, the Company
        adopted Financial Accounting Standards Board Statement (FASB) No. 123(R), *Share-Based
        Payments* effective
        January 1, 2006.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 2 to the
        consolidated financial statements, the Company’s losses, negative cash flows,
        working capital deficiency and stockholders’ deficiency raise substantial doubt
        about its ability to continue as a going concern. The consolidated financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
 /s/
        Holtz
        Rubenstein Reminick LLP
 
 Holtz
        Rubenstein Reminick LLP
 
 New
        York,
        New York
 April
        13,
        2007
  F-1
 
 REPORT
            OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
            the
            Board of Directors of:
 Torbay
            Holdings, Inc. and Subsidiaries
 
 We
            have
            audited the accompanying consolidated statements of operations and other
            comprehensive loss, changes in stockholders' deficiency and cash flows
            of Torbay
            Holdings, Inc. and Subsidiaries (the “Company”) for the year ended December 31,
            2005. These consolidated financial statements are the responsibility
            of the
            Company's management. Our responsibility is to express an opinion on
            these
            consolidated financial statements based on our audit.
 
 We
            conducted our audit in accordance with the standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            consolidated financial statements are free of material misstatement.
            An audit
            includes examining, on a test basis, evidence supporting the amounts
            and
            disclosures in the consolidated financial statements. An audit also includes
            assessing the accounting principles used and significant estimates made
            by
            management, as well as evaluating the overall financial statement presentation.
            We believe that our audit provided a reasonable basis for our
            opinion.
 
 In
            our
            opinion, the consolidated financial statements referred to above present
            fairly,
            in all material respects, the results of operations and cash flows of
            Torbay
            Holdings, Inc. and Subsidiaries for the year ended December 31, 2005
            in
            conformity with accounting principles generally accepted in the United
            States of
            America.
 
 The
            accompanying consolidated financial statements have been prepared assuming
            that
            the Company will continue as a going concern. The Company had a net loss
            of
            $555,070, a negative cash flow from operations of $341,959, a working
            capital
            deficiency of $296,250 and a stockholders' deficiency of $208,578. These
            factors
            raised substantial doubt about its ability to continue as a going concern.
            The
            accompanying consolidated financial statements do not include any adjustments
            that might result from the outcome of this uncertainty.
 
 
 WEINBERG
            & COMPANY, P.A.
 
 /s/
            Weinberg & Company, P.A.
 
 Boca
            Raton, Florida
 April
            18,
            2006
  F-2
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **DECEMBER
        31, 2006**


******ASSETS**2006**CURRENT
                ASSETS**Cash
            
            $
            14,680Accounts
                receivable, less allowance for doubtful accounts of $0
            
            
            66,283Inventory
            
            
            16,908Total
                current assets
            
            
            97,871**PROPERTY
                AND EQUIPMENT - NET**
            
            
            6,521**OTHER
                ASSETS**Intangible
                assets - net
            
            
            37,879Deposits
            
            
            6,795Total
                other assets
            
            
            44,674**TOTAL
                ASSETS**
            
            $
            149,066******LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCY****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            346,351Advances
                payable - related party
            
            
            29,000Advance
                payable - other
            
            
            15,000Notes
                payable
            
            
            50,000Total
                current liabilities
            
            
            440,351**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS’
                DEFICIENCY**Convertible
                preferred stock, $.0001 par value, 20,000,000 shares authorized,
              420,000
                shares issued and outstanding
            
            
            42Common
                stock, $.0001 par value, 250,000,000 shares authorized,
              152,837,900
                shares issued and outstanding.
            
            
            15,284Additional
                paid-in capital
            
            
            5,986,508Accumulated
                deficit
            
            
            (6,261,177
            )Accumulated
                other comprehensive loss
            
            
            (31,942
            )**TOTAL
                STOCKHOLDERS’ DEFICIENCY**
            
            
            (291,285
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**
            
            $
            149,066





See
      accompanying notes to consolidated financial
      statements.




F-3




**TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND
        2005**


2006
            
            2005**SALES,
                NET**
            
            $
            364,029
            
            $
            343,478**COST
                OF SALES**
            
            
            97,162
            
            
            92,994**GROSS
                PROFIT**
            
            
            266,867
            
            
            250,484**OPERATING
                EXPENSES**Selling
            
            
            92,305
            
            
            128,537Consulting
                fees
            
            
            151,750
            
            
            6,250Professional
                fees
            
            
            123,629
            
            
            178,428Compensation
            
            
            298,166
            
            
            154,509Other
                general and administrative
            
            
            232,265
            
            
            275,950Total
                Operating Expenses
            
            
            898,115
            
            
            743,674**LOSS
                FROM OPERATIONS**
            
            
            (631,248
            )
            
            (493,190
            )**OTHER
                EXPENSE**Interest
                and financing costs
            
            
            (36,962
            )
            
            (61,880
            )**NET
                LOSS**
            
            
            (668,210
            )
            
            (555,070
            )**OTHER
                COMPREHENSIVE LOSS**Foreign
                currency translation gain (loss)
            
            
            (16,511
            )
            
            14,259**COMPREHENSIVE
                LOSS**
            
            $
            (684,721
            )
            $
            (540,811
            )**NET
                LOSS PER COMMON SHARE - BASIC AND DILUTED**
            
            $
            (0.01
            )
            $
            (0.01
            )**WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND
                DILUTED**
            
            
            142,737,698
            
            
            94,308,407





See
      accompanying notes to consolidated financial
      statements.





F-4


**TORBAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





Convertible
                Preferred Stock
            
            Common
                Stock
            
            Common
                Stock To Be Issued
            
            Additional
                Paid-In
            
            Accumulated
            
            Accumulated
                Other Comprehensive
            
            Deferred
                Equity BasedShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            Income
                (Loss)
            
            Expenses
            
            TotalBalance,
                January 1, 2005
            
            
            420,000
            
            $
            42
            
            
            88,948,487
            
            $
            8,895
            
            
            1,888,889
            
            $
            189
            
            $
            4,784,190
            
            $
            (5,037,897
            )
            $
            (29,690
            )
            $
            (55,145
            )
            $
            (329,416
            )Common
                shares issued
            
            
            -
            
            
            -
            
            
            1,388,889
            
            
            139
            
            
            (1,388,889
            )
            
            (139
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Shares
                sold for cash, net of costs
            
            
            -
            
            
            -
            
            
            9,700,000
            
            
            970
            
            
            -
            
            
            -
            
            
            208,580
            
            
            -
            
            
            -
            
            
            -
            
            
            209,550Shares
                issued for compensation
            
            
            -
            
            
            -
            
            
            13,415,000
            
            
            1,341
            
            
            -
            
            
            -
            
            
            268,709
            
            
            -
            
            
            -
            
            
            (211,840
            )
            
            58,210Issuance
                of common stock forloan
                settlements
            
            
            -
            
            
            -
            
            
            3,790,000
            
            
            379
            
            
            -
            
            
            -
            
            
            90,321
            
            
            -
            
            
            -
            
            
            -
            
            
            90,700Stock
                issued for professional services
            
            
            -
            
            
            -
            
            
            100,000
            
            
            10
            
            
            -
            
            
            -
            
            
            3,990
            
            
            -
            
            
            -
            
            
            -
            
            
            4,000Finance
                cost - shares sold below market
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,000
            
            
            -
            
            
            -
            
            
            -
            
            
            5,000Shares
                issued for interest
            
            
            -
            
            
            -
            
            
            80,000
            
            
            8
            
            
            -
            
            
            -
            
            
            2,392
            
            
            -
            
            
            -
            
            
            -
            
            
            2,400Shares
                issued for repayment ofadvances
                from officers
            
            
            -
            
            
            -
            
            
            1,577,063
            
            
            158
            
            
            -
            
            
            -
            
            
            66,428
            
            
            -
            
            
            -
            
            
            -
            
            
            66,586Shares
                issued for options exercised for cash
            
            
            -
            
            
            -
            
            
            6,500,000
            
            
            650
            
            
            -
            
            
            -
            
            
            124,350
            
            
            -
            
            
            -
            
            
            -
            
            
            125,000Repricing
                of options
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            45,058
            
            
            -
            
            
            -
            
            
            -
            
            
            45,058Amortization
                of deferred compensation expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            55,145
            
            
            55,145Foreign
                currency translation gain
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            14,259
            
            
            -
            
            
            14,259Net
                loss, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (555,070
            )
            
            -
            
            
            -
            
            
            (555,070
            )**Balance,
                December 31, 2005**
            
            
            420,000
            
            $
            42
            
            
            125,499,439
            
            $
            12,550
            
            
            500,000
            
            $
            50
            
            $
            5,599,018
            
            $
            (5,592,967
            )
            $
            (15,431
            )
            $
            (211,840
            )
            $
            (208,578
            )




See
      accompanying notes to consolidated financial
      statements.




F-5




**TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





Convertible
                Preferred Stock
            
            Common
                Stock
            
            Common
                Stock To Be Issued
            
            Additional
                Paid-In
            
            Accumulated
            
            Accumulated
                Other Comprehensive
            
            Deferred
                Equity BasedShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            Income
                (Loss)
            
            Expenses
            
            TotalBalance,
                January 1, 2006
            
            
            420,000
            
            $
            42
            
            
            125,499,439
            
            $
            12,550
            
            
            500,000
            
            $
            50
            
            $
            5,599,018
            
            $
            (5,592,967
            )
            $
            (15,431
            )
            $
            (211,840
            )
            $
            (208,578
            )Cancel
                shares to be issued
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (500,000
            )
            
            (50
            )
            
            50
            
            
            -
            
            
            -
            
            
            -
            
            
            -Shares
                issued for cash
            
            
            -
            
            
            -
            
            
            19,138,461
            
            
            1,914
            
            
            -
            
            
            -
            
            
            150,586
            
            
            -
            
            
            -
            
            
            -
            
            
            152,500Shares
                issued for compensation
            
            
            -
            
            
            -
            
            
            8,200,000
            
            
            820
            
            
            -
            
            
            -
            
            
            202,680
            
            
            -
            
            
            -
            
            
            -
            
            
            203,500Repricing
                of options
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            34,174
            
            
            -
            
            
            -
            
            
            -
            
            
            34,174Amortization
                of deferred compensation expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            211,840
            
            
            211,840Foreign
                currency translation loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (16,511
            )
            
            -
            
            
            (16,511
            )Net
                loss, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (668,210
            )
            
            -
            
            
            -
            
            
            (668,210
            )**Balance,
                December 31, 2006**
            
            
            420,000
            
            $
            42
            
            
            152,837,900
            
            $
            15,284
            
            
            -
            
            $
            -
            
            $
            5,986,508
            
            $
            (6,261,177
            )
            $
            (31,942
            )
            $
            -
            
            $
            (291,285
            )





See
      accompanying notes to consolidated financial
      statements.




F-6




**TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


2006
            
            2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (668,210
            )
            $
            (555,070
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            38,235
            
            
            49,648Bad
                debts
            
            
            -
            
            
            9,062Amortization
                of loan costs
            
            
            -
            
            
            6,863Common
                stock and warrants issued for services
            
            
            203,500
            
            
            59,210Deferred
                equity based costs recognized
            
            
            211,840
            
            
            55,145Shares
                issued for interest
            
            
            -
            
            
            2,400Financing
                costs - shares sold below market value
            
            
            -
            
            
            5,000Financing
                costs - options repriced
            
            
            34,174
            
            
            45,058Changes
                in operating assets and liabilities:(Increase)
                decrease in accounts receivable
            
            
            (40,183
            )
            
            1,049(Increase)
                decrease in inventory
            
            
            33,123
            
            
            (24,932
            )Increase
                in accounts payable and accrued expenses
            
            
            19,713
            
            
            4,608Net
                cash used in operating activities
            
            
            (167,808
            )
            
            (341,959
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Purchase
                of intangibles
            
            
            -
            
            
            (11,000
            )Purchase
                of property and equipment
            
            
            (1,758
            )
            
            (1,305
            )Net
                cash used in investing activities
            
            
            (1,758
            )
            
            (12,305
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from issuance of common stock
            
            
            172,500
            
            
            314,550Advances
                received from related party
            
            
            37,000
            
            
            45,629Repayments
                of advances received from related party
            
            
            (26,750
            )
            
            (6,250
            )Advances
                received from others
            
            
            15,000
            
            
            -Principal
                payments on settlement payable
            
            
            -
            
            
            (63,328
            )Proceeds
                from issuance of notes and loans payable
            
            
            -
            
            
            32,900Net
                cash provided by financing activities
            
            
            197,750
            
            
            323,501**EFFECT
                OF CHANGES IN EXCHANGE RATES ON CASH**
            
            
            (16,511
            )
            
            14,259**INCREASE
                (DECREASE) IN CASH**
            
            
            11,673
            
            
            (16,504
            )**CASH
                - BEGINNING OF YEAR**
            
            
            3,007
            
            
            19,511**CASH
                - END OF YEAR**
            
            $
            14,680
            
            $
            3,007





See
        accompanying notes to consolidated financial statements.
  F-7


**TORBAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


**NOTE
      1**  **BASIS
      OF PRESENTATION AND SIGNIFICANT ACCOUNTING
      POLICIES**




***(A)
      Organization and Business Operations***




Torbay
      Holdings, Inc. ("Torbay”, “we”, “us”, “our” or the “Company") was incorporated
      in Delaware on March 24, 1999. We sell and market a computer mouse which we
      market under the name AirO2bic Mouse and software, including Nib software for
      PC's, McNib software for Macintosh computers and Brakemoor anti-fatigue
      software. The AirO2bic Mouse is a "grip-less" computer mouse which allows the
      user to move a cursor to any point on the screen without having to grip the
      mouse with the muscles of the hand. The AirO2bic Mouse design maintains the
      hand
      in a "functional neutral" position, one in which the muscles of the hand are
      kept under a constant, but reduced tension, allowing for normal blood flow
      and
      resulting in less fatigue.




***(B)
      Principles of Consolidation***




The
      consolidated financial statements include the accounts of Torbay Holdings,
      Inc.
      and its wholly owned subsidiaries Designer Appliances, Inc. (“DAI”) and Designer
      Appliances Limited (“DAL”). All significant intercompany transactions and
      balances have been eliminated in consolidation. DAL is currently not an
      operating company.




***(C)
      Basis of Presentation***




The
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States of America. The basis of
      accounting differs from that used in the United Kingdom statutory financial
      statements of DAL. Adjustments are made to translate the statutory financial
      statements of DAL to conform to accounting principles generally accepted in
      the
      United States of America. The consolidated financial statements are expressed
      in
      United States dollars. The functional currency of DAL is the British pound
      sterling.




***(D)
      Use of Estimates***




The
      preparation of 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 consolidated financial statements and the reported amounts
      of
      revenues and expenses during the reporting periods. Actual results could differ
      from those estimates. Specifically, our management has estimated the expected
      economic life and value of our intangible assets, our net operating loss for
      tax
      purposes and our stock, option and warrant expenses related to compensation
      to
      employees, directors, consultants and others. Actual results could differ from
      those estimates.




***(E)
      Cash*** ***and Cash Equvlalents***




For
      purposes of the statement of cash flows, we consider all short-term investments
      with original maturities of three months or less when purchased to be cash
      equivalents. We had no cash equivalents as of December 31, 2006. Cash consists
      of cash on deposit at financial institutions.


F-8
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**




***(F)
      Inventory***




Inventory
      is stated at the lower of cost or market using the first-in first-out method.
      Cost includes expense of freight-in transportation. Inventory consists entirely
      of finished goods, which include left-handed and right-handed computer mice
      for
      sale to customers. The inventory is produced by an overseas vendor using the
      Company's equipment.




***(G)
      Property and Equipment***




Property
      and equipment are stated at cost less accumulated depreciation. Expenditures
      for
      maintenance and repairs are charged to expense as incurred. Depreciation is
      computed using the straight-line method over the estimated useful lives of
      three
      to five years.




***(H)
      Intellectual Property Rights***




We
      have
      capitalized the costs to acquire intellectual property rights and amortize
      them
      over their estimated useful life of 10 years.




***(I)
      Impairment of Long-Lived Assets***




We
      review
      long-lived assets for impairment under Statement of Financial Accounting
      Standards (“SFAS”) No. 144, "Accounting for the Impairment or Disposal of
      Long-Lived Assets." Long-lived assets to be held and used are reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of an asset may not be recoverable. The carrying amount of
      a
      long-lived asset is not recoverable if it exceeds the sum of the undiscounted
      cash flows expected to result from the use and eventual disposition of the
      asset. Long-lived assets to be disposed of are reported at the lower of carrying
      amount or fair value less cost to sell. During the years ended December 31,
      2006
      and 2005, we have determined that there were no long-lived assets that were
      impaired.




***(J)
      Revenue Recognition***




Our
      products are sold directly over the internet and through distributorships.
      Products sold over the internet require complete payment via credit card prior
      to shipment. Products sold through distributors require the distributor to
      submit a purchase order and payment (according to terms and pricing approved
      by
      the Company) prior to shipment. Accordingly, revenues from sales over the
      internet and through distributors are recognized when the product is shipped
      as
      the price has been determined and collectibility has been reasonably assured.
      We
      provide a warranty on goods for two years from the date of sale. We have not
      established a warranty reserve as of December 31, 2006 or 2005 since the amount
      is not material based on past experience.




***(K)
      Website and Computer Software Costs***




We
      follow
      the AICPA's Statement of Position 98-1, "Accounting for the Costs of Computer
      Software Developed or Obtained for Internal Use" (SOP 98-1), in accounting
      for
      its website and software costs. Accordingly, costs to obtain computer software
      from third parties obtained for internal use have been capitalized and amortized
      over their estimated useful life of 5 years. Enhancements to software are
      amortized over an estimated useful life of 2 years. Costs incurred in operating
      a website that have no future benefits are expensed in the period in which
      they
      are incurred. Costs incurred in operating the website that have a future benefit
      are capitalized in accordance with SOP 98-1 and amortized over the respective
      future periods that are expected to benefit from the changes.


F-9
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**




***(L)
      Income Taxes***




We
      account for income taxes under SFAS No. 109, "Accounting for Income Taxes"
      ("Statement 109"). Under Statement 109, deferred tax assets and liabilities
      are
      recognized for the future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax basis. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years in
      which those temporary differences are expected to be recovered or settled.
      Under
      Statement 109, the effect on deferred tax assets and liabilities of a change
      in
      tax rates is recognized in income in the period that includes the enactment
      date.




***(M)
      Segments***




SFAS
      No.
      131, "Disclosures about Segments of an Enterprise and Related Information",
      requires that a public business enterprise report a measure of segment profit
      or
      loss, certain specific revenue and expense items, and segment assets. We do
      not
      operate in more than one segment and, accordingly, segment information has
      not
      been provided.




***(N)
      Fair Value of Financial Instruments***




The
      carrying amounts of certain financial instruments, including cash, accounts
      receivable, accounts payable and accrued expenses, and notes and advances
      payable approximate their fair value as of December 31, 2006 due to the
      relatively short-term maturity of these instruments.




***(P)
      Foreign Currency Translation***




The
      functional currency of DAL is the British pound sterling. Financial statements
      for this entity are translated into United States dollars at year-end exchange
      rates as to assets and liabilities and weighted average exchange rates as to
      revenues and expenses. Capital accounts are translated at their historical
      exchange rates when the capital transactions occurred.




***(Q)
      Comprehensive Loss***




We
      account for comprehensive income (loss) under SFAS No. 130, "Reporting
      Comprehensive Income" ("Statement 130"). Statement 130 establishes standards
      for
      reporting and the display of comprehensive income and its components. The
      foreign currency translation gain (loss) resulting from the translation of
      the
      financial statements of DAL expressed in British pound sterling to United States
      dollars is reported as Other Comprehensive Income (Loss) in the statements
      of
      operations and as Accumulated Other Comprehensive Income (Loss) in the statement
      of changes in stockholders' deficiency.




***(R)
      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 year as defined
      by SFAS No. 128, "Earnings Per Share". The assumed exercise of common stock
      equivalents was not utilized since the effect would be anti-dilutive. At
      December 31, 2006 and 2005 we had 7,500,000 and 19,200,000 potentially dilutive
      securities, respectively.


F-10
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**




***(S)
      Stock Based Compensation***




On
      January 1, 2006, we adopted the fair value recognition provisions of Financial
      Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
      (“SFAS”) No. 123(R), Accounting for Stock-Based Compensation, to account for
      compensation costs under our stock option plans. We previously utilized the
      intrinsic value method under Accounting Principles Board Opinion No. 25,
      Accounting for Stock Issued to Employees (as amended) (“APB 25”). Under the
      intrinsic value method prescribed by APB 25, no compensation costs were
      recognized for employee stock options because the option exercise price equaled
      the market price on the date of grant. Prior to January 1, 2006, if applicable,
      we only disclosed the pro forma effects on net income and earnings per share
      as
      if the fair value recognition provisions of SFAS 123(R) had been utilized.
      We
      did not have any grants of employee stock options during the years ended
      December 31, 2006 or 2005.





In
      adopting SFAS No. 123(R), we elected to use the modified prospective method
      to
      account for the transition from the intrinsic value method to the fair value
      recognition method. Under the modified prospective method, compensation cost
      is
      recognized from the adoption date forward for all new stock options granted
      and
      for any outstanding unvested awards as if the fair value method had been applied
      to those awards as of the date of grant. We had no outstanding unvested awards
      at the adoption date and we had no outstanding unvested awards during the 2005
      comparative period.




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.




Common
      stock issued as compensation is recorded based on the fair value of the stock
      issued on the date of grant.




***(T)
      Reclassifications***




Certain
      amounts from prior periods have been reclassified to conform to the current
      year
      presentation.




***(U)
      Advertising***




The
      Company expenses the production costs of advertising the first time the
      advertising takes place. Advertising and marketing expense included in the
      statement of operations for the years ended December 31, 2006 and 2005 was
      $36,302 and $78,017, respectively.




***(V)
      Recent Accounting Pronouncements***




In
      July
      2006, the FASB issued FASB Interpretation (FIN) No. 48, *“Accounting
      for Uncertainty in Income Taxes—An Interpretation of FASB Statement
      No. 109”* (FIN
      48). This Interpretation clarifies the accounting for uncertainty in income
      taxes recognized in a company’s financial statements. FIN 48 requires companies
      to determine whether it is “more likely than not” that a tax position will be
      sustained upon examination by the appropriate taxing authorities before any
      part
      of the benefit can be recorded in the financial statements. It also provides
      guidance on the recognition, measurement and classification of income tax
      uncertainties, along with any related interest and penalties. FIN 48 will also
      require significant additional disclosures. This Interpretation will be
      effective for fiscal years beginning after December 15, 2006. We will
      implement this Interpretation in the first quarter of 2007 on a prospective
      basis. We are currently evaluating the potential impact this Interpretation
      will
      have on our financial position and results of operations.


F-11
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**




In
      September 2006, the FASB issued SFAS No. 157, *“Fair
      Value Measurements”,* which
      provides guidance on how to measure assets and liabilities that use fair value.
      SFAS 157 will apply whenever another US GAAP standard requires (or permits)
      assets or liabilities to be measured at fair value but does not expand the
      use
      of fair value to any new circumstances. This standard also will require
      additional disclosures in both annual and quarterly reports. SFAS 157 will
      be
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and will be adopted by us beginning in the first quarter
      of
      2008. We are currently evaluating the potential impact this standard may have
      on
      our financial position and results of operations, but do not believe the impact
      of the adoption will be material.




In
      September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) No. 108, *“Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements”* (“SAB
      108”). SAB 108 was issued in order to eliminate the diversity of practice in how
      public companies quantify misstatements of financial statements, including
      misstatements that were not material to prior years’ financial statements. We
      will initially apply the provisions of SAB 108 in connection with the
      preparation of our annual financial statements for the year ending December
      31,
      2006. We have evaluated the potential impact SAB 108 may have on our financial
      position and results of operations and do not believe the impact of the
      application of this guidance will be material.





In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Liabilities" ("SFAS No. 159"). SFAS No. 159 provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value, and establishes presentation and disclosure requirements designed
      to
      facilitate comparisons between companies that choose different measurement
      attributes for similar types of assets and liabilities. The new guidance is
      effective for fiscal years beginning after November 15, 2007. We are currently
      evaluating the potential impact of the adoption of SFAS No. 159 on our financial
      position and results of operations.




**NOTE****2** ****** **GOING
      CONCERN**




The
      accompanying 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 consolidated financial statements, we have a net loss of
      $668,210 and a negative cash flow from operations of $167,808 for the year
      ended
      December 31, 2006 and a working capital deficiency of $342,480 and a
      stockholders' deficiency of $291,285 as of December 31, 2006. These factors
      raise substantial doubt about the Company’s ability to continue as a going
      concern. Our ability to continue as a going concern is dependent on our ability
      to raise additional funds and increase revenue. The consolidated financial
      statements do not include any adjustments that might be necessary if we are
      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 Aerobicmouse.





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





During
      2005, costs of $10,450 were deducted from the proceeds resulting from the sale
      of common stock.


F-12
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


In
      June
      2005, we issued 100,000 shares of common stock, valued at $4,000, for services
      provided. Of the amount, $3,000 offset an outstanding payable, and the remaining
      $1,000 was charged to expense.




During
      2005, a lender retained 1,700,000 shares of common stock, which had been held
      as
      collateral, in settlement of a loan payable in the amount of $57,800.




During
      2005, a lender retained 2,090,000 shares of common stock, which had been held
      as
      collateral, as payment for a loan in the amount of $32,900.




During
      2005, we issued 1,577,063 shares of common stock as repayments of an aggregate
      amount of $66,586 in advances received from officers.




During
      2005, we issued an aggregate of 13,240,000 shares of common stock to officers
      and directors for services. The shares have been valued at $264,880. Of this
      amount, $211,840 was deferred and expensed in 2006.




**NOTE
      4** **** **PROPERTY
      AND EQUIPMENT**




Property
      and equipment as of December 31, 2006 consisted of the following:




Manufacturing
                equipment
            
            $
            20,000Computer
                equipment
            
            
            13,095Office
                equipment
            
            
            5,52938,624Less
                accumulated depreciation
            
            
            (32,103
            )$
            6,521




Depreciation
      expense for the years ended December 31, 200 6
      and
      2005 was $9,528 and $8,982, respectively. All of the depreciation expense is
      included in general and administrative expenses.




**NOTE
      5** **** **INTANGIBLE
      ASSETS**




Intangible
      assets as of December 31, 2006 consisted of the following:




Intellectual
                property
            
            $
            44,000Software
                license
            
            
            53,957Software
                development
            
            
            60,900158,857Less
                accumulated amortization
            
            
            (120,978
            )$
            37,879


F-13
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


Amortization
      expense recorded in the statement of operations was $ 28,707
      and $40,666 for 2006 and 2005, respectively.




Amortization
      of the above costs for each of the next five years is as follows:


2007
              
              
              15,8792008
              
              
              4,0002009
              
              
              4,4002010
              
              
              4,4002011
              
              
              4,400




**NOTE
      6**  **ACCOUNTS
      PAYABLE AND ACCRUED EXPENSES**




**** The
      following schedule reflects accounts payable and accrued expenses as of December
      31, 2006:




Accounts
                payable
            
            $
            300,180Other
                accrued liabilities
            
            
            46,171$
            346,351




**NOTE****7** **** **LOAN
      PAYABLE - OFFICERS AND RELATED PARTIES**





During
      2006, the spouse of an officer advanced $37,000 to us for working capital
      purposes. Interest on the advances accrues at 9.5% per year and may be paid
      in
      the form of our common stock. We repaid $8,000 in cash during 2006. Accrued
      interest at December 31, 2006 is $2,788 and is included in accounts
      payable.





During
      2006 we repaid $18,750 of prior advances from the above individual.





During
      February 2005, an officer advanced $20,629 to us for working capital purposes.
      During the fourth quarter of 2004 an officer advanced $45,957 to us for working
      capital purposes. The advances were non-interest bearing and were repayable
      upon
      demand. In December 2005, we issued 1,577,063 shares of common stock as
      repayments of these advances.





During
      August 2005, the spouse of an officer advanced $25,000 to us for working capital
      purposes. During 2005, we issued 80,000 shares of common stock, valued at
      $2,400, as interest on the loan.





**NOTE
      8**  **NOTES
      PAYABLE**




We
      have issued a
      $50,000 note due to an individual that is non-interest bearing, convertible
      to
      shares of common stock at $1.50 per share and unsecured, which was due March
      23,
      2003. This note is currently being renegotiated.


F-14
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





**NOTE
      9** **** **INCOME
      TAXES**




The
      United States parent company and its United States subsidiary and its United
      Kingdom subsidiary file separate income tax returns. There
      was
      no income tax expense for the years ended December 31, 2006 and
      2005.




The
      effective tax expense differs from the "expected" tax expense for the years
      ended December 31, 2006 and 2005 (computed by applying U.S. federal corporate
      tax rate of 34 percent to income before taxes), as follows:





2006
            
            2005Computed
                “expected” tax expense (benefit)
            
            $
            (74,357
            )
            $
            (180,371
            )Change
                in valuation allowance
            
            
            74,357
            
            
            180,371Effective
                tax expense
            
            $
            -
            
            $
            -




The
      tax
      effects of temporary differences that give rise to significant portions of
      deferred tax assets for the United States parent company and its United States
      subsidiary at December 31, 200 6
      and
      2005 are as follows:





2006
            
            2005Deferred
                tax assets:Net
                operating loss carryforwards
            
            $
            1,189,048
            
            $
            1,114,691Less
                valuation allowances
            
            
            (1,189,048
            )
            
            (1,114,691
            )Net
                deferred tax assets
            
            $
            -
            
            $
            -




As
      of
      December 31, 200 6,
      the
      United States parent company and its United States subsidiary had net operating
      loss carry forwards of approximately $3,497,000 for income tax purposes,
      available to offset future taxable income expiring on various dates through
      2026. The valuation allowance as of December 31, 2006 was $1,189,048. The net
      change in the valuation allowance during the year ended December 31, 2006 was
      an
      increase of $74,357.




The
      United Kingdom subsidiary has also incurred substantial net operating losses
      in
      prior years which result in no income tax expense or benefit for the years
      ended
      December 31, 2006 and 2005. The subsidiary's available net operating loss carry
      forward of approximately $534,000 results in a deferred tax asset of $160,200
      (computed by applying the United Kingdom tax rate of 30%) which has been fully
      offset by a valuation allowance. The United Kingdom subsidiary is currently
      not
      an operating company.




**NOTE
      10** **** **COMMITMENTS
      AND CONTINGENCIES**




***(A)
      Commitments and Contingencies***




We
      conduct our operations from facilities occupied pursuant to a lease that
      commenced March 1, 2007 and which expires on April 30, 2008. These facilities
      include an apartment occupied by an officer. Such occupancy is for our benefit.
      Future minimum lease payments are as follows: 2007, $35,000; 2008,
      $14,000.




F-15
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


Rent
      expense for the years ended December 31, 2006 and 2005 was $57,671 and $64,687,
      respectively.




***(B)***  ***Royalties***




We
      are
      required to pay royalty payments at a rate of $3 per copy of certain software
      that is distributed in any manner. The current minimum royalties are $3,000
      per
      quarter. The term of the agreement is perpetual provided the Company continues
      to pay the royalty payments within 120 days after the end of each quarter and
      abides by the other terms of the agreement. During the years ended December
      31,
      2006 and 2005, the Company recorded the minimum royalty expense of $12,000
      and
      $12,000, respectively.




**NOTE
      11**  **STOCKHOLDERS’
      DEFICIENCY**




***(A)
      Preferred Stock***




We
      have
      designated 700,000 shares of our preferred stock as Series 1 Convertible
      Preferred Stock. The par value of the series is $.0001. Each preferred share
      is
      originally convertible into ten shares of our common stock. Each share of the
      Series 1 stock is entitled to one vote on all matters on which common
      stockholders are entitled to vote and are not entitled to receive dividends.




In
      July
      2001, we entered into a purchase agreement with two individuals who held the
      intellectual property rights, software and know-how to a computer mouse known
      as
      the "QUILL". Under the terms of the agreement, the Company acquired all of
      the
      sellers' rights, title and interest in the QUILL in exchange for 220,000 Series
      1 convertible preferred shares. The agreement also called for the issuance
      of an
      additional 200,000 shares of Series 1 convertible preferred shares upon the
      Company receiving an approval for the United Kingdom patent rights to the QUILL,
      which were granted in January 2002. These preferred shares will convert 1:10
      into 4,200,000 shares of common stock upon the QUILL generating $1,000,000
      net
      profit after tax averaged over four fiscal quarters within five years from
      the
      signing of the agreement. However, if the $1,000,000 net profit requirement
      is
      not met within
      five years from the signing of the agreement, then these preferred shares will
      convert 1:1 into 420,000 shares of common stock.




The
      net
      profit requirement was not met within five years from the signing of the
      agreement and we are required to issue 420,000 shares of common stock in
      conversion of the Series 1 preferred stock.




***(B)
      Common Stock***




During
      2005 we amended our Certificate of Incorporation to increase the number of
      authorized shares from 120,000,000 shares (100,000,000 of common and 20,000,000
      of preferred) to 270,000,000 shares (250,000,000 of common and 20,000,000 of
      preferred) with shareholder approval.




During
      2006 we issued 8,200,000 shares of common stock, valued at $203,500, for
      services.


F-16
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**




During
      2006, we sold 100,000 shares of common stock for cash proceeds of $2,500. We
      also received $20,000 during 2006 from a sale of common stock which occurred
      in
      2005.





During
      2006, we sold 11,538,461 shares of common stock for cash proceeds of
      $75,000.





During
      2006, we repriced 8,000,000 common stock purchase warrants with exercise prices
      ranging from $0.07 to $0.10. The repricing reduced the exercise price of the
      warrants to $0.01. The holder of the warrants then exercised 7,500,000 of the
      warrants and we received cash proceeds of $75,000. As a result of the repricing,
      the fair value of the warrants increased by $34,174 and this amount has been
      charged to expense during that period.





During
      2005, we received advances on a common stock purchase agreement. The gross
      amount of the advances was $200,000. We issued 9,000,000 shares of common stock
      in settlement of this advance. Costs of $10,450 were deducted, resulting in
      net
      proceeds of $189,550. The costs have been applied against additional paid-in
      capital. The purchaser will also be issued warrants exercisable into 9,000,000
      shares of common stock. Half of these warrants will be exercisable at $0.024
      and
      half will be exercisable at $0.033. The warrants will be issued upon the
      effectiveness of a registration statement covering the shares and the warrants.
      Upon the achievement of certain conditions, the Company may force the exercise
      of the warrants. The warrants will expire on December 31, 2008.





During
      2005, we issued 2,090,000 shares of common stock as collateral for a loan .
      These collateral shares were retained as payment of the loan.




In
      June
      2005, we issued 100,000 shares of common stock, valued at $4,000, for services
      provided. Of the amount, $3,000 offset an outstanding payable, and the remaining
      $1,000 was charged to expense.





During
      2005, we issued 700,000 shares of common stock for proceeds of $20,000. We
      have
      recorded a finance cost of $5,000 related to certain of these stock
      sales.





During
      2005, we issued 6,500,000 shares of common stock upon exercise of warrants,
      for
      gross proceeds of $125,000. Of this amount, $20,000 was received in 2006. The
      warrants had been modified to reduce the exercise price. As a result of the
      repricing, we have recorded a financing cost of $45,058 during
      2005.




In
      December 2005, we issued 1,577,063 shares of common stock as repayments of
      advances from officers described in Note 7.




During
      November and December 2005, we issued an aggregate of 13,415,000 shares of
      common stock, valued at $270,050, for services. Of this amount, $211,840 was
      deferred and expensed in 2006.




During
      2005, a lender retained 1,700,000 shares of common stock, which had been held
      as
      collateral, in settlement of a loan payable in the amount of $57,800. The
      collateral shares had been provided by an officer of the Company, and these
      shares were issued to the officer in November 2005




During
      2005, we issued 80,000 shares of common stock, valued at $2,400, as interest
      on
      a loan from the spouse of an officer.


F-17
  **TORBAY
        HOLDINGS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**




***(C)
      Warrants***




The
      following table summarizes the changes in our warrants outstanding and the
      related prices for the shares of our common stock.


Number
              
              Weighted
                  Average Exercise Price Per ShareOutstanding
                  January 1, 2005
              
              
              21,500,000
              
              $
              0.07Granted
              
              
              3,500,000
              
              
              0.01Cancelled
              
              
              (3,500,000
              )
              
              0.12Exercised
              
              
              (6,500,000
              )
              
              0.02Outstanding
                  December 31, 2005
              
              
              15,000,000
              
              
              0.07Granted
              
              
              8,000,000
              
              
              0.01Cancelled
              
              
              (8,000,000
              )
              
              0.09Exercised
              
              
              (7,500,000
              )
              
              0.01Outstanding
                  December 31, 2006
              
              
              7,500,000
              
              
              0.05Exerciseable
                  December 31, 2006
              
              
              7,500,000
              
              
              0.05Weighted
                  average remaining life
              
              
              2.9
                  years





**NOTE
      12**  **CONCENTRATIONS**





At
                December 31, 2006, one customer accounted for approximately 47% of
                accounts receivable. This customer accounted for approximately 26%
                of
                sales during 2006 and approximately 22% of sales during 2005. One
                other
                customer accounted for 14% of sales for 2005. The Company purchases
                its
                inventory from a single supplier.





F-18