Form 10QSB for TALLY HO VENTURES INC
22-Aug-2005
Quarterly Report
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Companys future financial performance. The Company intends the forward-looking statements throughout this quarterly report and the information incorporated by reference to be covered by the safe harbor provisions for forward-looking statements. All projections and statements regarding the Companys expected financial position and operating results, its business strategy, its financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by the use of forward-looking words such as may,believe,plan,will,anticipate,estimate,expect,intend, and other words and phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on information available as of the date of this report on Form 10-KSB and on numerous assumptions and developments that are not within our control. Although the Company believes these forward-looking statements are reasonable, the Company cannot assure you they will turn out to be correct.
Description of the Business
On May 12, 2005, Tally-Ho exchanged 4,563,490 shares of Tally-Ho common stock for 100% of the ownership interest in Belgravia Intervest Group Limited, (Belgravia) a British Virgin Islands company. As a result of this reverse merger, Belgravia has become the operating company and the business plan associated with the Company prior to the transaction has been abandoned.
Belgravia is a wealth management organization focused on serving the needs of families and high net worth individual throughout the world, with over $450 million under management and more than 17,000 families looking to Belgravia to provide a broad range of sophisticated services, including financial counseling, estate planning, asset allocation, investment management and corporate services.
Belgravia was formed by the September 2002 merger of Belgravia Group International and The Intervest Group. Belgravia Group International had been formed by our President, Mr. Peter Smith, in 1994 as he moved from the London Stock Exchange into offshore financial services. The Intervest Group was formed in 19995 by the combination of Lazard Holdings (Bahamas) and Arabian Brokers International (Saudi Arabia), resulting in a multinational business group with operations in 15 countries across Europe, Asia and Africa. Initially, The Intervest Group limited its operations to providing taxation and investment advice to expatriates in the Middle East. Although the geographical scope and the scope of services provided by the combined Belgravia Intervest Group Limited have greatly expanded, the focus on providing services to expatriates has remained.
There are currently estimated to be 25 million expatriate workers and this figure is projected to grow by 15% per year. More couples are retiring overseas at an earlier age. Overseas positions are well paid; but few companies offer the benefits of a decade ago. Many workers are required to take care of themselves when it comes to financial planning and health care. (Source: Merrill Lynch, Cap Gemini and Ernst & Young). This represents a significant market, growing market for the wealth management industry and Belgravia is well placed to service this growing market.
Belgravia recognized some years ago that the international Independent Financial Advisor (IFA) market was in the process of change and that the opportunity was arising for a new business model. Belgravia was, and continues to be, determined to seize that opportunity - to be the first, and best, of a new breed of international IFAs that will emerge in a compliance and regulation driven international marketplace; and, to become a market leader in terms of advice and service led financial services. To achieve this, it recognized that it would have to raise the bar in terms of international IFA standards of management, advice and service. At the same time, it acknowledged the need for business scale and critical mass. Belgravia has already emerged as a structured, disciplined, focused and profitable distribution organization operating to, and consistently achieving, high standards of productivity and profitability through the delivery of quality advice, service and products to the Companys clients.
This focus has enabled the Company to more clearly identify priorities, targets and measures when developing distribution capability and the business infrastructure. The following characteristics have been identified as key to hittting our targets:
§ A track record of growing revenues and profits, and clearly identifiable brand.
§ A Business Proposition that is visionary but pragmatic, and supported by a clear, well-articulated business plan, and financial forecasts;
§ A business that has a compelling and believable story, with the people, systems and processes to back up that story;
§ An infrastructure that has the right people in the right roles; working to common systems, processes and controls; with internal procedures that are robust and consistent; and strong financial and compliance controls;
§ A company culture that has clarity and consistency as to who does what around here; and how things work around here, along with a shared belief in the overall client proposition and management standards and values.
By early 2005, Belgravia Intervest Group Limited had made good to excellent progress against the first three of these measures. In particular, it built the distribution capability and can demonstrate a clear track record of growth in revenues and profits. The initial business plan targets have been met despite the business facing some very challenging decisions and difficult trading conditions, such as the Gulf War and weak equity markets. Belgravia has begun to target recurring income on funds under management.
Belgravias channel now holds financial advisory licenses in Belgium, Holland, Kuwait, Oman, Azerbaijan, China, Japan, Luxembourg, (Cyprus, Bahrain, Malaysia, Singapore, Kenya and Uganda to follow). The Company has compliance structures (including compliance managers) in place in each territory, although these standards are being constantly raised. Compliance will soon be centered in one location adding further value and streamlining to an already effective business
A key part of the operational focus has been the design and implementation of financial templates for each distribution channel against which the business units within each channel can be measured. Belgravia is now focusing on the alignment of systems and controls, while also building towards a commonality of culture across various distributions channels. Its efforts here are geared around client proposition which ensures that all IFAs follow the same advice process, using the same documentation, and applying the same service standards. Belgravia has planned for this process to be fully operational and effective by the end of 2005. Having successfully installed the financial software system, Belgravia has made significant progress in centralizing its finance and accounts function. Since the early part of 2005, the Company has had a centralized commissions function also.
Belgravia now intends to further develop the distribution capacity by rolling out a Franchise style operation to attract experienced IFAs who want to operate under the Belgravia brand and licenses, but retain a degree of commercial independence.
RISKS AND UNCERTAINTIES
If The Company Does Not Continue To Create, Attract And Retain Viable Products In The Wealth Management Industry, Our Profitability Could Be Adversely Affected.
The wealth management industry has experienced considerable growth in the past decade. Changing demographics and concern about financial security in retirement, compounded by a continuing low-interest rate environment, are expected to result in a continued increase in assets available for investment. In recent years, investors have endeavored to increase their knowledge of available investment products and services, and wealth management firms have responded by increasing the availability of and access to information in respect of these wealth management products and services. Simultaneously, there has been an increase in the number, type and sophistication of products and services offered by financial institutions. The Company believes that these changing factors will result in an increased number of investors seeking some level of professional financial and investment advice in managing their investments. Belgravia Intervest Group is well positioned to meet this challenge as it continues to establish itself as a fully integrated wealth management business, combining professional investment management products, solutions and services with knowledgeable financial advisory professionals.
However, the profitability of the Company is directly related to its ability to create, attract and retain specific products. These products are subject to a fee, generally calculated as a percentage of their net asset value. Should a sizable number of clients seek to terminate their arrangements with the Company, its profitability would be adversely affected.
The Company May Not Be Able to Successfully Integrate Acquisitions
The Company's growth strategy has relied in part on acquisitions and the associated realization of operating synergies. A successful acquisition requires the Company to identify suitable candidates for purchase on acceptable terms, and the acquired business to be successfully integrated in a timely and non-disruptive manner designed to minimize the risk of loss of client business. Even with the investment of management and financial resources, an acquisition may not produce the anticipated revenue, earnings or business synergies. In addition, acquisitions can involve non-recurring charges and, if not successful, the write-off of amounts of goodwill and other intangible assets that could have an adverse effect on the Company's financial results. Management performs an extensive review of the value of goodwill and other intangible assets on an ongoing basis, which review has not identified any required adjustments.
Market Influences Beyond The Control Of The Company Could Affect Our Overall Profitability.
Negativity in domestic and international capital markets may challenge the Company. The movement of capital markets is beyond the control of teh Company but, to a significant degree, may impact on the Company's overall profitability. Revenues from the Company's investment management arm are primarily based on market values, generally determined using trading values of underlying securities in global markets. The unpredictability of the global economy may also affect retail and institutional clients' willingness to actively trade in capital markets, impacting the Company's commission revenues as well as trading and corporate finance activities.
The Wealth Management Industry is Highly Competitive, With Some Companies Having Greater Financial or Other Resources
The Company operates in a highly competitive environment that includes other providers of wealth management products such as mutual funds and private client investment managers, financial advisors, investment dealers, banks and insurance companies, some of which have greater financial or other resources than the Company. In order to remain competitive, the Company will continue to be innovative in the development of financial products and solutions for its clients, to monitor its investment performance and to provide the highest level of service to its clients.
There may be competitive pressures from time to time to lower the fees that the Company charges on its products and services which may impact the ability to retain clients in the future. While changes to management fee rates, commission rates and trailer fee rates will affect the operating results of the Company, management believes that its current fee structure is competitive with its industry peers.
Changing Regulatory Requirements May Affest the Profitability of Our Business or Limit Our Ability to Conduct Business
The regulatory operating environment for wealth management and financial services continues to expand, becoming more regimented and complex. The Company supports regulatory changes that enhance the integrity and reputation of our industry and that protect the interests of our client base. The Company's compliance personnel actively participate in the development of new legislation and regulation. However, new regulatory requirements may involve changes to the way we currently conduct our business or may increase the cost and associated profitability of our business. The Company believes that its ability to comply with all applicable laws and regulations including these emerging changes is dependent upon the establishment, implementation and maintenance of extensive compliance policies and procedures. The Company has a team of experienced compliance personnel that works full time on these efforts. When the Company completes an acquisition, it is possible that the acquired company's compliance standards may have been insufficient or not as developed as those of the Company. The Company attempts to resolve compliance issues through its due diligence review; however, it is possible that its review will not identify all possible problems.
Regardless of the Company's effectiveness in monitoring and administering established compliance policies and procedures, the Company, and any of its directors, officers, employees or agents, may be subject to liability or fines which may limit the ability to conduct business.
The Capital Requirements of the Company may Require Additional Equity Funding, Which Would Dilute the Ownership of Our Current Stockholders
Belgravia Intervest Group may be required to raise additional funds through public or private financing, strategic relationships or other arrangements for a variety of purposes, including business acquisitions, to capitalize on unanticipated opportunities, as well as to respond to competitive pressures. Additional equity funding will reduce the percentage ownership of the existing shareholders of the Company and may dilute net book value per share. It is also possible that any such equity funding may involve securities which have rights or privileges senior to those of holders of common shares or that any debt financing, if available, may involve restrictive covenants. There can be no assurance that such additional funding, if needed, will be available on economic terms, or at all.
The Company Has Assumed Certain Credit Risks
The Company is exposed to the risk that third parties that owe the Company cash, securities or other assets may not fulfill their obligations, due to lack of liquidity, bankruptcy, operational failure or other cause. These parties include trading counterparties, customers, clearing agents, exchanges, clearing houses, other financial intermediaries, and issuers whose securities are held by us.
Additional information about the Company can be obtained at its web site, http://www.belgravia-intervest.com/.
Basis of Presentation
The accompanying consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-QSB, have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation as a going concern. The Company had net income of $585,715 for the quarter ended June 30, 2005 and as of June 30, 2005, had working capital of $222,500.
Discussion of Financial Results
The unaudited consolidated financial statements included in this report reflect the pro forma results of consolidating the operations of the Company as it existed prior to the reverse merger with Belgravia and the operations of Belgravia during the same period of time. Therefore, a period-to-period comparison is not meaningful.
Liquidity and Capital Resources
As of June 30, 2005, the Company had working capital of $222,500. We generated a positive cash flow of $74,605 from operating activities during the quarter ended June 30, 2005.
The Company believes it will require additional new capital only in order to fund its planned acquisitions over the next 12 months; which, if required may be obtained through equity or debt financing.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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