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EX-21.1 - SUBSUDIARIES - Bay Acquisition Corp.f10k2009ex21i_bayacquisiton.htm
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Bay Acquisition Corp.f10k2009ex31i_bayacquisiton.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Bay Acquisition Corp.f10k2009ex32i_bayacquisiton.htm
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

———————
FORM 10-K
———————
 
x     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended: December 31, 2009
or
 
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________
 

———————

BAY ACQUISITION CORP.
(Exact name of registrant as specified in its charter)

———————

Nevada
 
001- 28099
 
77-0571784
(State or Other Jurisdiction
 
(Commission
 
(I.R.S. Employer
of Incorporation or Organization)
 
File Number)
 
Identification No.)
 
420 Lexington Avenue, Suite 2320, New York, NY 10170
(Address of Principal Executive Office) (Zip Code)
 
(212) 661-6800
Registrant’s telephone number, including area code)


(Former name or former address, if changed since last report)
———————
Securities registered pursuant to Section 12(b) of the Act:
     
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.001 Par Value
 
OTC.BB
     
Securities registered pursuant to Section 12(g) of the Act:
     
Common Stock
 
(Title of Class)
 
———————
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
  o
 Yes
x
 No
 
 
 

 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
  o
 Yes
x
 No
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
 
x
 Yes
o
 No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (¤ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was requiredto submit and post such files).
 
o
 Yes
x
 No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K.
 
  o  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
   
Large accelerated filer
  o    
Accelerated filer
  o  
Non-accelerated filer
  o    
Smaller reporting company
x
 
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
x
 Yes
  o
 No
   
As of June 30, 2009 the aggregate value of the voting common stock held by non-affiliates of the registrant was approximately $1,873,814 based on the closing market price of the registrants common stock of $0.08 on that day.
 
As of April 15, 2010 there were 23,422,663 shares outstanding with a par value of $0.001.
 
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
    o
 Yes
  o
 No
 
 
 
 
 




 
2009 ANNUAL REPORT OF FORM 10-K

TABLE OF CONTENTS

 
 
 
          Page
PART I
 
 
 
 
 
Item 1.
Business
4
Item 1A.
Risk Factors
6
Item 1B.
Unresolved Staff Comments
6
Item 2.
Properties
6
Item 3.
Legal Proceedings
6
Item 4.
Submission of Matters to a Vote of Security Holders
6
   
 
PART II
 
 
 
 
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
7
Item 6.
Selected Financial Data
7
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
7
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
9
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
10
Item 9A(T).
Controls and Procedures
10
Item 9B
Other Information
     11
     
PART III
   
     
Item 10.  
Directors, Executive Officers and Corporate Governance
12
Item 11.
Executive Compensation
13
Item 12.
   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13
Item 13.
Certain Relationships and Related Transactions, and Director Independence
14
Item 14.
Principal Accounting Fees and Services.
14
Item 15.
Exhibits, Financial Statement Schedules
14
SIGNATURES
   

 
3

PART I
 


Item 1.
Business.
 
Introduction

We are a Nevada corporation organized in 1997.  From 1999 through 2004, we were in the business of developing and publishing packaged software for Macintosh and Windows computers.  In 2005, we acquired SpaceLogic, Ltd., an Israeli corporation, which developed and sold systems related to airport baggage inspection.  We operated this business until July, 2008 when we sold SpaceLogic, Ltd back to its original stockholders.  Although we own several non-exclusive licenses to SpaceLogic’s products, we have yet to re-enter into the airport security business.  Since July, 2008, we have not conducted any material business operations and have been searching to acquire an operating business. Our only expenses have related to seeking an acquisition, our auditing and legal fees, and other public company expenses.  

Our Plan

Our business plan is to seek, investigate, and, if warranted, acquire an interest in a business opportunity, including possibly re-entering the market for airport security products through either an acquisition or through organic growth.  In the event that we acquire another business, the acquisition may be made by merger, exchange of stock, or otherwise.  We have no target under consideration, we have very limited sources of capital, and we probably will only be able to take advantage of one business opportunity. At the present time we have not identified any business opportunity that we plan to pursue, nor have we reached any preliminary or definitive agreements or understandings with any person concerning an acquisition or merger.

We have had only limited operating activity since completing the sale of our subsidiary in July, 2008. Our management intends to create operating revenue through either re-entering the airport security market or acquiring an operating business. Our search for a business opportunity will not be limited to any particular geographical area or industry, including both U.S. and international companies. Our management has unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions and factors. Our management believes that companies who desire a public market to enhance liquidity for current stockholders or plan to acquire additional assets through issuance of securities rather than for cash will be potential merger or acquisition candidates.

Investigation and Selection of Business Opportunities

We anticipate that business opportunities will come to our attention from various sources, including our sole officer/director, our stockholders, professional advisors such as attorneys and accountants, securities broker-dealers, investment banking firms, venture capitalists, members of the financial community and others who may present unsolicited proposals.  Management expects that prior personal and business relationships may lead to contacts for business opportunities; however, we have not entered into any direct or indirect negotiations at the time of this filing with any person, corporation or other entity regarding any possible business reorganization involving the Company.
      
A decision to participate in a specific business opportunity may be made upon our management’s analysis of the quality of the other company’s management and personnel, the anticipated acceptability of the business opportunity’s new products or marketing concept, the merit of its technological changes, the perceived benefit that it will derive from becoming a publicly held entity, and numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria.  In many instances, we anticipate that the historical operations of a specific business opportunity may not necessarily be indicative of the potential for the future because of the possible need to shift marketing approaches substantially, expand significantly, change product emphasis, change or substantially augment management, or make other changes.  We will be dependent upon the owners of a business opportunity to identify any such problems which may exist and to implement, or be primarily responsible for the implementation of, required changes.
      
 
4

 
In our analysis of a business opportunity we anticipate that we will consider, among other things, the following factors:

·  
Potential for growth and profitability, indicated by new technology, anticipated market expansion, or new products;

·  
Our perception of how any particular business opportunity will be received by the investment community and by our stockholders;

·  
Whether, following the business combination, the financial condition of the business opportunity would be, or would have a significant prospect in the foreseeable future of becoming sufficient to enable our securities to qualify for listing on a exchange or on a national automated securities quotation system, such as the stock market.

·  
Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements, or from other sources;

·  
The extent to which the business opportunity can be advanced;

·  
Competitive position as compared to other companies of similar size and experience within the industry segment as well as within the industry as a whole;

·  
Strength and diversity of existing management, or management prospect that are scheduled for recruitment;

·  
The cost of our participation as compared to the perceived tangible and intangible values and potential; and

·  
The accessibility of required management expertise, personnel, raw materials, services, professional assistance, and other required items.
      
No one of the factors described above will be controlling in the selection of a business opportunity.  Management will attempt to analyze all factors appropriate to each opportunity and make a determination based upon reasonable investigative measures and available data.  Potentially available business opportunities may occur in many different industries and at various stages of development. Thus, the task of comparative investigation and analysis of such business opportunities will be extremely difficult and complex.  Potential investors must recognize that, because of our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
 
 
5

 
Form of Acquisition

We cannot predict the manner in which we may participate in a business opportunity. Specific business opportunities will be reviewed as well as our needs and desires and those of the promoters of the opportunity.  The legal structure or method deemed by management to be suitable will be selected based upon management’s review and our relative negotiating strength.  We may agree to merge, consolidate or reorganize with another corporation or form of business organization.
      
Regardless of the legal structure, we likely will acquire another corporation or entity through the issuance of Common Stock or other securities.  Although the terms of any such transaction cannot be predicted, it is possible that the acquisition will occur simultaneously with a sale of shares representing a controlling interest by our current principal stockholder.  In addition, our present management and stockholders most likely will not have control of a majority of our voting shares following a merger or reorganization transaction.  As part of such a transaction, our existing director will probably resign and new directors may be appointed without any vote by our stockholders.

This method may also include, but is not limited to, leases, purchase and sale agreements, licenses, joint ventures and other contractual arrangements. We may act directly or indirectly through an interest in a partnership, corporation or other forms of organization.

Competition

In our effort to locate an attractive opportunity, we expect to encounter competition from business development companies, venture capital partnerships and corporations, venture capital affiliates of large industrial and financial companies, small investment companies, and wealthy individuals. Many of these persons or entities have significantly greater experience, resources and managerial capabilities than we do and will be in a better position than we are to obtain access to attractive business opportunities. We also will experience competition from other public “blank check” companies, many of which may have more funds available for the investigation and selection of a business opportunity. In addition, we expect competition will be especially tough due to the recent downturns in the economy which includes poor performance by stocks in both the national markets and in the over-the-counter markets making it less attractive for private companies to “go public.”
 
Item 1A.
Risk Factors.
 
Not applicable for smaller reporting companies.

Item 1B.
Unresolved Staff Comments.
 
None.
 
Item 2.
Properties.
 
We do not currently own or lease any property.   Pending the resumption of operations or an acquisition, our sole officer and director provides us with office space and administrative services.
 
Item 3.
Legal Proceedings.

None.
 
Item 4.
Submission of Matters to a Vote of Security Holders.

None.

6

 
PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
The following table sets forth, for the periods indicated, the range of quarterly high and low sales prices for our Common Stock which trades on the Over-the-Counter Bulletin Board under the symbol “SLGI.”

             
Common Stock
 
High
   
Low
 
2009
           
First Quarter
  $ 0.019     $ 0.006  
Second Quarter
    0.095       0.01  
Third Quarter  
    0.25       0.06  
Fourth Quarter
    0.20       0.10  
                 
2008
               
First Quarter
  $ 0.145     $ 0.06  
Second Quarter
  $ 0.25     $ 0.055  
Third Quarter  
  $ 0.14     $ 0.05  
Fourth Quarter
  $ 0.10     $ 0.01  

Holders

As of March 31, 2010, there were approximately 60 stockholders of record. The Company believes that it has approximately 300 beneficial stockholders.

Dividend Policy

We have never paid cash dividends on our Common Stock.  Payment of dividends is within the discretion of board of directors and will depend upon our earnings, capital requirements and operating and our future financial condition.

Sales of Unregistered Securities for the year ended December 31, 2009.

None

Purchases of Equity Securities.
 
During the year ended December 31, 2009, we did not purchase any of our equity securities, nor did any person or entity purchase any equity securities on our behalf.

Item 6.
Selected Financial Data.
 
Not Applicable.
 
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation.
 
The following Management’s Discussion and Analysis or Plan of Operation contains forward-looking statements.  Forward-looking statements reflect management’s current expectations and are inherently uncertain.  Our actual results may differ significantly from management’s expectations.
 
 
7

 
 
The following discussion and analysis should be read in conjunction with our audited 2009 and 2008 financial statements which are included herein.  This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.  Such discussions represent only the best present assessment of our management.

Overview

Prior to the reversal of the acquisition of our SpaceLogic, Ltd. and SecureLogic, Ltd subsidiaries (the “Subsidiaries”) on or about July 15, 2008 through the transfer of those Subsidiaries to the former owners of the Subsidiaries (the “Acquisition Reversal”), the Company was engaged in the business of developing and marketing systems that manage the movement of people and baggage through airports.  Subsequent to the Acquisition Reversal, the Company is engaged in reconstituting its business plan to re-enter the homeland security marketplace through a combination of organic development, the acquisition of products and/or the acquisition of companies.

In reading Management’s Discussion and Analysis of Financial Condition and Results of Operations, the reader should keep in mind that the Company’s financial statements reflect the treatment of the transfer of the Subsidiaries in the Acquisition Reversal as a discontinued operation and therefore, does not reflect the business of the Company after July 15, 2008 through the date of this Report.

Results of Operations
 
We had no revenue for both the year ended December 31, 2009 and for the year ended December 31, 2008, which reflects the discontinued operations of our Israeli subsidiary as a result of the Acquisition Reversal which occurred on July 15, 2008 and our subsequent attempts to acquire new products and/or companies which has not yet come to fruition.
 
Expenses 

Our expenses are comprised of legal and professional fees incurred in connection with maintaining the Company’s reporting obligations.  Total expenses for the year ended December 31, 2009 was $60,000 as compared to $39,000 for the year ended December 31, 2008.

Operating Profit (Loss)

Our operating loss for the year ended December 31, 2009 was $49,000 which represents the expenses described above, as compared to an operating loss of $39,000 for the year ended December 31, 2008.
 
Liquidity and Capital Resources 
 
As of December 31, 2009, total current assets were $186,000 and total current liabilities were $36,000.  As of December 31, 2009, the Company had a cash balance of $4,000.  Our financial statements raise doubt to our ability to continue operating as a “going concern”.  However, we believe that our existing cash together with potential revenue from the licenses received in the Acquisition Reversal will be sufficient to support our operations for the next 12 months; provided that, in the event that that Company shall acquire additional products or subsidiaries, we may require significant amounts of additional capital sooner than the fourth quarter of 2010. In such a case, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. Incurring indebtedness would result in an increase in our fixed obligations and could result in borrowing covenants that would restrict our operations. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If financing is not available when required or is not available on acceptable terms, we may be unable to develop or enhance our products or services, or, we may potentially not be able to continue business activities. Any of these events could have a material and adverse effect on our business, results of operations and financial condition.
 
 
8

 
 
Critical Accounting Policies and Estimates
 
Our discussion and analysis of its financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to bad debts, income taxes and contingencies and litigation.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about 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.
 
Off-Balance Sheet Arrangements
 
We do not currently have any off-balance sheet arrangements as defined in Item 303(c)(2) of Regulation S-K.
 
Forward-Looking Statements
 
The statement made above relating to the adequacy of our working capital is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statements that express the “belief,” “anticipation,” “plans,” “expectations,” “will” and similar expressions are intended to identify forward-looking statements.
 
The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include matters relating to the business and financial condition of any company we acquire. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
 
Not Applicable
 
Item 8.
Financial Statements and Supplementary Data.
 
See Item 15 on page 14.

Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
 
We have had no disagreements with our independent registered public accounting firms during our last two fiscal years. In January  2010, Friedman, LLP was retained as our independent registered public accounting firm upon their combination with our former independent registered public accounting firm Bagell, Josephs, Levine & Company, LLC.

 
9

 

Item 9A(T)
Controls and Procedures.

Disclosure Controls.

We carried out an evaluation required by Rule 13a-15(b) of the Securities Exchange Act of 1934 under the supervision and with the participation of our chief executive and financial officer of the effectiveness of the design and operation of our “disclosure controls and procedures” as of the end of the period covered by this Report.

Disclosure controls and procedures are designed with the objective of ensuring that (i) information required to be disclosed in an issuer’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) information is accumulated and communicated to management, including our Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The evaluation of our disclosure controls and procedures included a review of our objectives and processes and effect on the information generated for use in this Report. This type of evaluation will be done quarterly so that the conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. We intend to maintain these controls as processes that may be appropriately modified as circumstances warrant.

Based on his evaluation, our chief executive and financial officer has concluded that our disclosure controls and procedures are not effective for the following reasons:

a.  
The deficiency was identified as the Company’s limited segregation of duties amongst the Company’s employees with respect to the Company’s control activities. This deficiency is the result of the Company’s limited number of employees. This deficiency may affect management’s ability to determine if errors or inappropriate actions have taken place.  Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.

b.  
The deficiency was identified with respect to the Company’s Board of Directors.  This deficiency is the result of the Company’s limited number of external board members.  This deficiency may give the impression to the investors that the board is not independent from management.  Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.

Internal Controls.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our management, consisting of one person who serves as our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2009 based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on our evaluation under that criteria, our management concluded that our internal control over financial reporting was not effective as of December 31, 2009.
 
 
10

 
 
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  We were not required to have, nor have we engaged our independent registered public accounting firm to perform, an audit on our internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2009 that have materially affected, or are reasonably likely to material affect, our internal control over financial reporting.

 
Item 9B.
Other Information.
 
None.
 
 
11

 
 
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance.
 
We have only one officer and director.

Name
 
Age
 
Position(s)
Paul Goodman
 
48
 
President, Secretary, Treasurer and Director

Mr. Goodman has been our sole officer and director since July 2008.  Mr. Goodman is a partner in the New York City law firm of Cyruli Shanks & Zizmor LLP and concentrates on the representation of Internet and new media clients handling a wide range of corporate and financing transactions including venture capital, angel round investing and mergers and acquisitions. He was formerly a faculty member of the Queens College Computer Science Department and is the author of five books on computer programming. Mr. Goodman became a director of Maxus Technology Corporation in December 2006.  He has also been on the board of directors of the Company since 1999.  Mr. Goodman received his law degree from the City University of New York and also holds a Bachelors and Masters Degree in Computer Science.

Audit Committee

We do not have an audit committee.

Audit Committee Financial Expert

Not applicable.

Limitation of Our Director’s Liability

Our Articles of Incorporation eliminate the liability of our directors for monetary damages to the fullest extent possible.  However, our sole director (and future directors) remains liable for:  

 
·
any breach of the director's duty of loyalty to us or our stockholders,

 
·
acts or omission not in good faith or that involve intentional misconduct or a knowing violation of law,

 
·
payments of dividends or approval of stock repurchases or redemptions that are prohibited by Delaware law, or

 
·
any transaction from which the director derives an improper personal benefit.

These provisions do not affect any liability any director may have under federal and state securities laws.

Code of Ethics

On March 15, 2005, the Company adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. For purposes of this Item, the term “Code of Ethics” means written standards that are reasonably designed to deter wrongdoing and to promote: Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;  full, fair, accurate, timely, and understandable disclosure in reports and documents that the issuer files with, or submits to, the SEC and in other public communications made by the Company; compliance with applicable governmental laws, rules and regulations;  the prompt internal reporting of violations of the code to the board of directors or another appropriate person or persons; and, accountability for adherence to the code. copy of the Code of Ethics can be found as Exhibit 99 to our Form 10-KSB dated April 15, 2005.
 
 
12

 
 
Item 11.
Executive Compensation.
 
We currently have no employees, and Mr. Paul Goodman our President, is our only executive officer.  Mr. Goodman receives no compensation.

Outstanding Awards at Fiscal Year End

   The Company had no unexercised options, restricted stock that has not vested, or equity incentive plans as of December 31, 2009.

Item 12.          Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table provides information as of March 31, 2010 concerning the beneficial ownership of our Common Stock by each director, each person known by us to be the beneficial owner of at least 5% of any class of our Common Stock, and all executive officers and directors as a group.  All addresses are c/o the Company,
 
Name and Address of Beneficial Owners
 
Number of
Shares of
Common Stock(1)
 
Percentage
of Class
Officers and Directors
       
         
Paul Goodman
 
140,000
 
*
         
All officers and directors as a group (one person)
 
140,000  
 
*
         
Baytree Capital Associates, LLC
     
  6,200,000 (2)
 
30.5 %
     
     
 
         
         
         
         
———————
 
* - Less than 1.0%
 
(1)
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all securities beneficially owned by them. Beneficial ownership exists when a person has either the power to vote or sell our Common Stock.  A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days whether upon the exercise of options, warrants or otherwise.  
 
(2)
Includes shares of Common Stock held by Michael Gardner. Mr. Gardner is the managing member of Baytree Capital Associates, LLC.
 
 
13

 
 
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
 
 
None
 
Item 14.
Principal Accounting Fees and Services.
 
Audit Fees
 
The fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements and review of our financial statements included in our Forms 10-K and 10-Q for the fiscal year ended December 31, 2009 were $31,200 as compared to $7,500 for the fiscal year ended December 31, 2008.
 
Audit-Related Fees
 
We did not incur any audit related fees during the fiscal years ended December 31, 2009 or 2008.
 
Tax Fees
 
Our principal independent registered public accounting firms did not perform any tax related services for us during the fiscal years ended December 31, 2009 or 2008.  
 
All Other Fees
 
Our independent registered public accounting firms did not perform any other services for us during the fiscal years ended December 31, 2009 or 2008.  We have not adopted audit committee pre-approval policies and procedures.
 
 
PART IV
 
Item 15.
Exhibits, Financial Statement Schedules.
 
 
(a)
Documents filed as part of the report.
 
 
(1)
All Financial Statements
 
Consolidated Balance Sheets at December 31, 2009 and 2008
 
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008
 
Consolidated Statement of Stockholders’ Equity for Years Ended December 31, 2009 and 2008
 
Consolidated Statements of Cash Flows for Years Ended December 31, 2009 and 2008
 
 
(2)
Financial Statements Schedule
 
 
(3)
Exhibits
 
Exhibit Number
 
Description
 
     
 
3.1
 
Articles of Incorporation of the Registrant.*
     
3.2
 
Certificate of Amendment to the Articles of Incorporation of the Registrant.*
     
 
 
14

 
 
3.3
 
By-Laws of Registrant.*
     
4.1
 
Form of Common Stock Certificate *
     
10.1
 
1999 Stock Option Plan (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (Commission File Number 333-46712) filed with the SEC on September 27, 2000).***
     
10.2
 
2005 Equity Compensation Plan (incorporated by reference to the Company's definitive proxy statement filed with the SEC on April 5, 2005).***
     
10.3
 
Form of Option Agreement.***
     
14
 
Code of Ethics.**
     
21.1
 
Subsidiaries of Registrant
     
23.2
 
Consent of Friedman, LLP
     
31
 
CEO and CFO certifications required under Section 302 of the Sarbanes-Oxley Act of 2002
     
32
 
CEO and CFO certifications required under Section 906 of the Sarbanes-Oxley Act of 2002
     
*
 
Incorporated into this Report by reference to the Registrant's Registration Statement on Form 10 dated November 15, 1999.
     
**
 
Incorporated into this Report by reference to Exhibit 99 to the Registrant's Annual Report on Form-10KSB filed April 14, 2005.
     
***
 
Incorporated into this Report by reference to the Registrant's Annual Report on Form-10KSB filed April 12, 2007.

 
15

 
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 15, 2010
 
         
BAY ACQUISITION CORP.
  
 
  
  
   
 
By:  
/s/ Paul Goodman
   
Paul Goodman
   
President (Principal Executive Officer and
Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature
 
Title
 
Date
         
/s/ Paul Goodman
 
Director
 
April 15, 2010
Paul Goodman
       
         
         
         
         
         
         
 
 
16

 
 
BAY ACQUISITION CORP.

INDEX TO FINANCIAL STATEMENTS
 
  Page
   
Reports of Independent Registered Public Accounting Firms  18-19
   
Financial Statements:  
   
Balance Sheets as of December 31, 2009 and 2008  20
   
Statement of Operations for the years ended December 31, 2009 and 2008  21
   
Statement of Shareholders’ Equity for the years ended December 31, 2009 and 2008 22
   
Statements of Cash Flows for the years ended December 31, 2009 and 2008 23
   
Notes to Financial Statements 24
   

 
17

 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

 
The Board of Directors and Stockholders
Bay Acquisition Corp.
 
We have audited the accompanying balance sheet of Bay Acquisition Corp. (the “Company”), as of December 31, 2009 and the related statement of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2009. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Bay Acquisition Corp. as of December 31, 2008, and for the year then ended were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements, dated April 15, 2009 and included an explanatory paragraph relating to the existence of substantial doubt about the Company’s ability to continue as a going concern.

We conducted our audit in accordance with 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bay Acquisition Corp., as of December 31, 2009 and the results of its operations and cash flows for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has experienced recurring losses and deficiency of cash flows from operations. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome.


/s/ Friedman LLP

April 15, 2010


18



 


Report of Independent Registered Public Accounting Firm
 

To the Board of Directors and Stockholders
of Bay Acquisition Corp.


We have audited the accompanying consolidated balance sheet of Bay Acquisition Corp. (a Delaware corporation) (the “Company”) as of December 31, 2008 and the related consolidated statements of operations, retained earnings 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 did not audit the financial statements of Space Logic, Ltd and Secure Logic, Ltd., wholly owned subsidiaries, which statements reflect total assets of $1,186 (U.S. dollars in thousands, except share data) as of June 30, 2008, and total revenues of $1,793 (U.S. dollars in thousands, except share data) for the six month period then ended and are presented as discontinued operations because of the shareholder settlement requiring the acquisition be reversed. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Space Logic, Ltd. and Secure Logic, Ltd., is based solely on the report of the other auditors.
 
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.  The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. 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 provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bay Acquisition Corp. as of December 31, 2008, and the results of its operations and its cash flows for the year ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company has incurred recurring losses and experiences deficiency of cash flow from operations. These conditions raise substantial doubt about its ability to continue as a going concern.  Management plans regarding those matters also are described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.

Marlton, New Jersey
April 15, 2009

The report is a copy of the previously issued report.
The predecessor auditor has not reissued the report
 
 
 
 
19


BAY ACQUISITION CORP
(FORMERLY: SECURELOGIC CORP.)
BALANCE SHEETS
(U.S. Dollars in thousands, except share data)
 
   
December 31,
   
Consolidated
December 31,
 
   
2009
   
2008
 
             
Assets
           
Current assets:
           
  Cash
  $ 4     $ 215  
  Loan to shareholder
    171       -  
  Interest receivable
    11       -  
                 
        Total current assets
    186       215  
                 
        Total assets
  $ 186     $ 215  
                 
Liabilities and Shareholders' Equity
               
Current liabilities:
               
  Trade payables
  $ 36     $ 16  
                 
                 
        Total current liabilities
    36       16  
                 
                 
Commitments and contingencies
               
                 
Shareholders' equity:
               
  Common stock $0.0001 par value; 100,000,000 shares authorized,
               
    23,422,663 issued and outstanding at December 31, 2009 and 2008
    23       23  
  Additional paid-in capital
    14,247       14,247  
  Treasury stock (32,899,667 shares) at cost
    (4,957 )     (4,957 )
  Accumulated deficit
    (9,163 )     (9,114 )
  Accumulated other comprehensive income
    -       -  
                 
        Total shareholders'  equity
    150       199  
                 
        Total liabilities and shareholders'  equity
  $ 186     $ 215  
 
The accompanying notes are an integral part of these financial statements.
 
 
20

 

BAY ACQUISITION CORP.
(FORMERLY: SECURELOGIC CORP.)
STATEMENTS OF OPERATIONS
(U.S. Dollars in thousands, except share and per share data)

   
Year Ended
 
   
December 31,
   
Consolidated
December 31,
 
   
2009
   
2008
 
             
Revenue
  $ -     $ -  
                 
Cost of revenue
    -       -  
                 
Gross profit
    -       -  
                 
General and administrative expenses
    60       39  
                 
Loss from continuing operations
    (60 )     (39 )
                 
Interest income
    11       -  
                 
                 
Net loss from continuing operations
    (49 )     (39 )
                 
Loss from discontinued operations
    -       (251 )
                 
                 
Net loss applicable to common shares
  $ (49 )   $ (290 )
                 
                 
Net loss per share:
               
 Continuing Operations
  $ (0.00 )   $ (0.01 )
 Discontinued Operations
  $ (0.00 )   $ (0.01 )
                 
Weighted average shares outstanding
               
   Basic and Diluted
    23,422,663       39,434,523  

The accompanying notes are an integral part of these financial statements
 
 
21

 
 
BAY ACQUISITION CORP.
(FORMERLY: SECURELOGIC CORP.)
STATEMENT OF STOCKHOLDERS’ EQUITY
For the years ended December 2008 and 2009
(U.S. Dollars in thousands, except share data)
 
 
               
Additional
               
Other
             
   
Common
   
Par
   
Paid-in
   
Treasury
   
Accumulated
   
Comprehensive
   
Comprehensive
       
   
Stock
   
Value
   
Capital
   
Stock
   
Deficit
   
Income (loss)
   
Income (loss)
   
Total
 
                                                 
Consolidated Balance December 31, 2007
    55,947,331     $ 56     $ 7,366     $ -     $ (8,824 )   $ (95 )         $ (1,497 )
                                                               
 Reversal of May 2005 acquisition
    (32,524,668 )     (33 )     6,881       (4,957 )                           1,891  
                                                               
 Net Loss
                                    (290 )             (290 )     (290 )
                                                                 
Translation adjustment
                                            95       95       95  
                                                                 
Comprehensive loss
                                                  $ (195 )        
                                                                 
                                                                 
Consolidated Balance December 31, 2008
    23,422,663     $ 23     $ 14,247     $ (4,957 )   $ (9,114 )   $ -             $ 199  
                                                                 
 Net Loss
                                    (49 )                     (49 )
                                                                 
Translation adjustment
                                            -               -  
                                                                 
Comprehensive loss
                                                               
                                                                 
                                                                 
Balance December 31, 2009
    23,422,663     $ 23     $ 14,247     $ (4,957 )   $ (9,163 )   $ -             $ 150  
 
The accompanying notes are an integral part of these financial statements.
 
 
22

 
 
BAY ACQUISITION CORP.
(FORMERLY: SECURELOGIC CORP.)
STATEMENTS OF CASH FLOWS
(U.S. Dollars in thousands)
 
   
Years Ended
 
   
December 31,
   
Consolidated
December 31,
 
   
2009
   
2008
 
Cash flows from operating activities:
           
  Net loss
  $ (49 )   $ (39 )
  Adjustments to reconcile net loss to net cash (used in) operating activities:
               
  Increase in interest receivable
    (11 )     -  
  Increase in accounts payable
    20       16  
Net cash (used in) continuing operations
    (40 )     (23 )
                 
Discontinued Operations
               
Loss from discontinued operations
    -       (251 )
  Adjustments to reconcile net cash provided by discontinued operations
    -       359  
                 
Net cash provided by operating activities - discontinued operations
    -       108  
Net cash provided by (used in) operating activities
    (40 )     85  
                 
Cash flows from investing activities:
               
Discontinued Operations
               
  Adjustments to reconcile net cash (used in) discontinued operations
    -       (119 )
Net cash used in investing activities
    -       (119 )
                 
Cash flows from financing activities:
               
  Loan to stockholder
    (171 )     -  
                 
Net cash provided by financing activities
    (171 )     -  
                 
Effect of exchange rates changes on cash
    -       95  
                 
Net increase (decrease) in cash
    (211 )     61  
Cash at beginning of year
    215       154  
                 
Cash at end of year
  $ 4     $ 215  
                 
                 
Supplemental Cash Flow Information
               
During the period, cash was paid for the following:
               
    Interest
  $ -     $ -  
    Income taxes
  $ -     $ -  
The accompanying note are an integral part of these financial statements.
 
 
 
 
23

 

BAY ACQUISITION CORP.
(FORMERLY SECURELOGIC CORP.)
NOTES TO THE FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Bay Acquisition Corp. (formerly: SecureLogic Corp) (“the Company”) is incorporated in Nevada.  In 2005, the Company acquired SpaceLogic, an Israeli-based company, in exchange for a total of 33,253,611 newly issued shares of the Company’s common stock, which represented 59.8% of the Company’s common shares. The acquisition was accounted for as a reverse acquisition.  SpaceLogic is in the business of developing Airport Baggage Handling Systems, as well as Automated Materials Handling Systems.

In July, 2008, as further described in NOTE 4 below, as a result of the settlement of certain litigation, and upon the approval by the court and the Company’s shareholders, the SpaceLogic acquisition that closed in May 2005 was reversed and the Company’s business operations associated with the airport security screening and handling markets that were acquired in 2005 was returned to the previous owners as were the shares of the Company’s common stock issued in that acquisition.

The Company is actively seeking to merge, invest in or acquire other companies to generate revenues and profits.

All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements present those of Bay Acquisition Corp.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The financial statements shown for the year ended December 31, 2008 are consolidated.  The financial statements as of December 31, 2009 are not.

FINANCIAL STATEMENTS IN U.S. DOLLARS

The reporting currency of the Company is the U.S. dollar (“dollar").
 
The dollar is the functional currency of the Company and its subsidiary in the United States. Transactions and balances originally denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been measured in United States dollars in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters.” All transaction gains and losses from the measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its majority owned subsidiary (the “Group”). Intercompany transactions and balances have been eliminated upon consolidation.

CASH AND CASH EQUIVALENTS

Cash equivalents include unrestricted, short-term, highly liquid investments that are readily convertible to cash with maturities of three months or less at the date of acquisition.
 
 
24

 
 
CONCENTRATION OF CREDIT RISKS

Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents.

The Group maintains cash and cash equivalents and investments with major financial institutions and are insured by the Federal Deposit Insurance Corporation up to federally insured limits.

STOCK-BASED COMPENSATION
 
The Company records compensation expense associated with stock options and other forms of equity compensation in accordance with FASB ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provision of FASB ASC Topic 718, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option pricing model.

The following table summarizes the effects of stock-based compensation resulting from the application of SFAS No. 123R (revised 2004) included in discontinued operations in the Statement of Operations as follows:
 
   
YEAR ENDED DECEMBER 31,
 
   
2009
   
2008
 
Operating expenses
    -       95  
Total
  $ -     $ 95  
FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount reported in the balance sheet for cash and cash equivalents, short-term bank deposits, note receivables, trade payables and other accounts payable approximates their fair value.

BASIC AND DILUTED NET LOSS PER SHARE

Basic and diluted net loss per share has been computed using the weighted-average number of ordinary shares outstanding during the year. Outstanding share options and shares issued and reserved for outstanding share options have been excluded from the calculation of basic and diluted net loss per share to the extent such securities are anti-dilutive
 
 RECENT ACCOUNTING PRONOUNCEMENTS

Effective July 1, 2009, the FASB's ASC became the single official source of authoritative, nongovernmental generally accepted accounting principles in the United States ("GAAP"). The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other than guidance issued by the Securities and Exchange Commission. Our accounting policies were not affected by the conversion to ASC. However, references to specific accounting standards in the footnotes to our financial statements have been changed to refer to the appropriate section of ASC.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.

INCOME TAXES

The Company accounts for income taxes under the provisions of FASB ASC 740, “Income Taxes.” This pronouncement requires recognition of deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period in which the enactment rate changes. Deferred tax assets and liabilities are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.
 
 
25

 
 
Effective January 1, 2007, the Company adopted the provisions of FASB ASC 740-10-05, “Accounting for Uncertainties in Income Taxes” The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Federal, state and local income tax returns for years prior to 2007 are no longer subject to examination by tax authorities.

NOTE 3 – GOING CONCERN

As reflected in the accompanying financial statements, the Company’s operations for the years ended December 31, 2009 and 2008 resulted in a net loss of $49,000 and $39,000, respectively.  The Company’s ability to continue operating as a “going concern” is dependent on its ability to raise sufficient additional working capital. Management’s plans in this regard include raising additional cash from current stockholders and potential investors and lenders.

These financials statements do not include adjustments relating to the recoverability and classifications of recorded asset amounts and reclassification of liabilities that might be necessary should the Company be unable to continue its existence.

NOTE 4 – SETTLEMENT OF SHAREHOLDER SUITS

On November 14, 2006, Michael Gardner, a stockholder holding approximately 7.9% of the Company’s Common Stock, filed a complaint in the Supreme Court of New York for the County of New York against defendants, which include certain officers and directors of the Company, Gary Koren, Shalom Dolev, Cathal L. Flynn, Iftach Yeffet, Tony Gross and Michael Klein and SecureLogic, as a nominal defendant.  The complaint purported to be a shareholder derivative action, alleging that the Defendants breached their fiduciary duties as directors and officers, committed waste, and were unjustly enriched (the “Baytree Action”). 
 
On November 15, 2006, Treeline Investment Partners and David Jaroslawicz filed a complaint in the Supreme Court of New York for New York County against Gary Koren and Killy Koren regarding two transactions for the purchase of shares of the Company’s Common Stock performed in 2005. While the Company is not a party to this litigation, the Company may be obligated to indemnify Mr. Koren for some or all of his litigation expenses (the “Treeline Action”).

On December 28, 2007, the parties in both the Baytree Action and the Treeline Action entered into a comprehensive Settlement Agreement and Release to settle the lawsuits. On May 1, 2008, the United States District Court for the Southern District of New York approved the Settlement Agreement.  Thereafter, the stockholders of the Company approved the Settlement Agreement and the transactions called for in the Settlement Agreement.

Pursuant to the Settlement Agreement, on or about July 15, 2008, the parties effectively reversed the May 2005 acquisition whereby the Company acquired the outstanding capital stock and business of SpaceLogic Ltd. and its subsidiary SecureLogic Ltd. in exchange for shares of the Company’s Common Stock.  Pursuant to the Settlement Agreement, on or about July 15, 2008, the following events occurred: (i) the individual Defendants surrendered their Common Stock to the Company for cancellation with Mr. Koren transferring 1,200,000 of his shares to Treeline Investment Partners, L.P. and Mr. Jaroslowicz, and (ii) the Company transferred to a new entity beneficially owned by Messrs. Koren, Dolev, Yeffet, Gross and Klein (“Newco”), all of the business and assets of the Company other than (a) $350,000 in cash, (b) accounts in existence prior to the acquisition in 2005, (c) corporate and tax records, and (d) 75% of the proceeds from the Company’s directors and officers insurance policy after payment of certain legal fees and expenses. Newco assumed all liabilities and obligations of the Company except certain liabilities and obligations of the Plaintiffs, other shareholders, and tax and Securities and Exchange Commission filings not to exceed $5,000 in the aggregate.  The Settlement Agreement also includes mutual general releases and non-disparagement provisions.
 
 
26

 
 
As December 31, 2008, all shares which were surrendered to the Company and  are being held as treasury shares.
 
In addition, Newco granted the Company or a designated subsidiary four non-exclusive licenses for individual iScreen Systems. Pursuant to these licenses, the Company will not market the iScreen Systems except through Newco or its designee. Each license will give the Company or its designated subsidiary the right to receive the first $200,000 in proceeds from the sale of the licensed iScreen System and an equal portion in any amount in excess of $200,000.

On July 22, 2008, the Company amended its Articles of Incorporation to change the Company’s name to “Bay Acquisition Corp.”

NOTE 5 – DISPOSAL OF BUSINESS

On July 15, 2008, as described in NOTE 4, the Company ceased operations of its subsidiaries.  The Company’s consolidated financial statements have been reclassified to reflect this sale as discontinued operations, for all periods presented.  The gain on the sale was $6,884,000, which is included in the Additional Paid-in-Capital.  However, the parties involved in the transaction are deemed to be related parties. As such, the gain has been reclassified to Additional Paid-in-Capital on the consolidated balance sheet.

NOTE 6 – RELATED PARTY TRANSACTIONS

The President and CEO of the Company, Mr. Paul Goodman, had performed legal services for the Company and received remuneration in the amount of $8,500 and $14,250 for the years ended December 31, 2009 and 2008, respectively.

NOTE 7 – LOAN TO SHAREHOLDER

On February 11, 2009, the Company made a short term bridge loan to a stockholder of the Company in the amount of $171,000. The loan bears interest at a rate of 8% per annum and is due and payable on May 15, 2010. The loan is classified as “Note receivable” on the accompanying consolidated balance sheet of the Company.

NOTE 8 – DISCONTINUED OPERATIONS

As previously disclosed in Note 4, the Company completed the reversal of the May 2005 acquisition.

The summarized results of operations for the six months ended June 30, 2008 are as follows:

   
Six Months
 
   
Ended
 
   
June 30,
 
   
2008
 
       
Revenues
  $ 1,793  
Cost of Revenues
    1,057  
Gross Profit
    736  
Operating Expenses
    819  
Operating Loss
    (83 )
Other Income (Expense), net
    (3 )
Provision for Taxes
    216  
Net Income (Loss)
  $ 130  
 
 
27

 
 
NOTE 9 – INCOME TAXES

The tax effect of temporary differences, primarily net operating loss carryforwards, gave rise to the Company's deferred tax asset in the accompanying December 31, 2009 and December 31, 2008 balance sheets.

Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. Because of the current uncertainty of realizing the benefit of the tax carry forward, a valuation allowance equal to the tax benefit for deferred taxes has been established. The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company's ability to generate taxable income during the carry forward period.

As of December 31, 2009, the Company has net operating loss carry forwards of approximately $9,163,000 that can be utilized to offset future taxable income for Federal income tax purposes through 2029. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code Section 382.  
 
 
Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.  Significant components of the Company's deferred tax assets and liabilities are summarized as follows:

   
December 31,
 
   
2009
   
2008
 
Deferred tax asset:
           
             
Net operating loss carryforwards
  $ 3,207,000     $ 3,190,000  
Less: Vaulation allowance
    (3,207,000 )     (3,190,000 )
                 
Net Deferred Tax Asset
  $ -     $ -  


Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities.  Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return.  Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

NOTE 10 – SUBSEQUENT EVENT

The Company has evaluated subsequent events in accordance with ASC Topic 855, “Subsequent Events” through April 15, 2010 which is the date the financial statements are available to be issued. During the evaluation no subsequent events were identified.
 
26