Attached files
file | filename |
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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.
|
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.
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.”
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