Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended:

March 31, 2009

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)

Delaware	001-15819	13-3883101
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	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)

SECURELOGIC CORP.

(Former name, former address and former fiscal year, if changed since last report)

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. þ Yes o No

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	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 18, 2008 there were 20,283,573 shares of common stock outstanding.

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.

þ Yes o No

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

BAY ACQUISITION CORP

(FORMERLY: SECURELOGIC CORP.)

CONDENSED CONSOLIDATED BALANCE SHEET

(U.S. Dollars in thousands, except share data)

(Unaudited)

	March 31,			December 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	44		$	215
Note receivable		171			-
Other current assets		2			-

Total current assets		217			215

Total assets	$	217		$	215

Liabilities and Shareholders' Equity
Current liabilities:
Trade payables	$	21		$	16


Total current liabilities		21			16

Commitments and contingencies

Shareholders' equity:
Common stock $0.001 par value; 100,000,000 shares authorized,
20,283,573 issued and outstanding		20			20
Additional paid-in capital		14,250			14,250
Treasury stock (35,663,758 shares)		(4,957	)		(4,957	)
Accumulated deficit		(9,117	)		(9,114	)

Total shareholders' equity		196			199

Total liabilities and shareholders' equity	$	217		$	215

See notes to condensed consolidated financial statements.

BAY ACQUISITION CORP.

(FORMERLY: SECURELOGIC CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATOINS

(U.S. Dollars in thousands, except share data)

(Unaudited)

	Three Months Ended
	March 31,			March 31,
	2009			2008

Revenue	$	-		$	-

Cost of revenue		-			-

Gross profit		-			-

General and administrative expenses		5			-

Loss from continuing operations		(5	)		-

Interest income		2			-

Loss from continuing operations before taxes		(3	)		-

Provision for income taxes		-			-

Net loss from continuing operations		(3	)		-

Income from discontinued operations		-			142

Provision for income taxes		-			(208	)

Net income from discontinued operations		-			350

Net income (loss) applicable to common shares	$	(3	)	$	350


Net income (loss) per share:
Basic - Continuing Operations	$	(0.00	)	$	0.01
Diluted - Discontinued Operations	$	(0.00	)	$	0.01

Weighted average shares outstanding
Basic and Diluted		20,283,573			55,947,330

See notes to condensed consolidated financial statements.

BAY ACQUISITION CORP.

(FORMERLY: SECURELOGIC CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. Dollars in thousands)

(Unaudited)

	Three Months Ended
	March 31,			March 31,
	2009			2008
Cash flows from operating activities:
Net loss	$	(3	)	$	-
Adjustments to reconcile net loss to net cash provided by operating activities:
Increase in other current assets		(2	)		-
Increase in accounts payable		5			-
Net cash provided by operating activities		-			-

Discontinued Operations
Income from discontinued operations		-			350
Adjustments to reconcile net cash used in discontinued operations		-			(471	)

Net cash used in operating activities - discontinued operations		-			(121	)

Cash flows from investing activities:
Discontinued Operations
Adjustments to reconcile net cash provided by discontinued operations		-			119
Net cash provided by investing activities		-			119

Cash flows from financing activities:
Loan to stockholder		(171	)		-

Discontinued Operations
Adjustments to reconcile net cash provided by discontinued operations		-			-
Net cash provided by financing activities		-			-

Effect of exchange rates changes on cash		-			9

Net increase (decrease) in cash		(171	)		7
Cash at beginning of period		215			154

Cash at end of period	$	44		$	161

Supplemental Cash Flow Information
During the period, cash was paid for the following:
Interest		-			-
Income taxes		-			-

See notes to condensed consolidated financial statements.

BAY ACQUISITION CORP.

(FORMERLY SECURELOGIC CORP.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL

STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying condensed unaudited interim consolidated financial statements have been prepared by Bay Acquisition Corp. (formerly, SecureLogic Corp.) (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position of the Company as of March 31, 2009 and the results of operations and cash flows for the interim periods indicated in conformity with generally accepted accounting principles applicable to interim periods. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company for the year ended December 31, 2008 that is included in the Company’s Form 10-K filed with the Securities and Exchange Commission on May 18, 2009 (the “2008 10-K”).

On July 15, 2008, pursuant to the terms of the Settlement Agreement dated December 28, 2007 and approved by the United States District Court for the Southern District of New York on May 1, 2008, the Company effected a reversal of the May, 2005 acquisition of its SpaceLogic, Ltd. and SecureLogic, Ltd. operating subsidiaries through the transfer of those subsidiaries to a new company formed by certain of its former officers and directors, namely, Gary Koren, Shalom Dolev, Cathal L. Flynn, Iftach Yeffet, Tony Gross and Michael Klein in exchange for the return and cancellation of a total of 35,663,758 shares of the Company’s common stock and certain non-exclusive licenses to the Company’s iScreen software products. These financial statements reflect the operations of our former subsidiaries only through July 15, 2008 and are shown as discontinued operations. Since July 15, 2008, the Company has not had any significant operations. Thus, the results of operations presented are not indicative of the results to be expected for future quarters or for the year ending December 31, 2009.

NOTE 2 – REVERSAL OF MAY, 2005 ACQUISTIONS

NOTE 3 - RECLASSIFICATION OF ACCOUNT IN THE PRIOR FINANCIAL STATEMENTS

The Company has reclassified certain accounts in the financial statements for the three months ended March 31, 2008 to reflect the discontinued operations associated with the shareholder settlement requiring the acquisition reversal of its subsidiaries, Space Logic, Ltd. and Secure Logic, Ltd. The statements reflect the reclassification of these operations in accordance with the provisions of SFAS No. 144 “Accounting for Impairment or Disposal of Long Lived Assets”. There has been no effect on net loss for the three months ended March 31, 2008.

NOTE 4 – GOING CONCERN

As reflected in the accompanying financial statements, the Company’s operations for the three month ended March 31, 2009, resulted in a net loss of $3,000 and the Company's balance sheet reflects a net stockholders’ deficiency of $9,117,000. These factors raise substantial doubt about the Company’s ability to continue operating as a “going concern”. Management’s plans in this regard include raising additional cash from current stockholders and potential investors and lenders.

NOTE 5 – DISPOSAL OF BUSINESS

On July 15, 2008, as described in NOTE 2, the Company ceased operations of its subsidiaries. The Company’s condensed 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. 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 – LOAN TO STOCKHOLDER

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 31, 2009. The loan is classified as “Note receivable” on the accompanying condensed consolidated balance sheet of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read together with the financial statements and related notes included in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in those forward-looking statements as a result of certain factors, including, but not limited to, those contained in the discussion on forward-looking statements that follows this section.

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

Total revenues for the three month periods ended March 31, 2009 and 2008 were $0 which reflects the discontinued operations of our Israeli subsidiary as a result of the Acquisition Reversal which occurred on July 15, 2008.

Gross profit for the three month periods ended March 31, 2009 and 2008 were both $0 which reflects the discontinued operations of our Israeli subsidiary as a result of the Acquisition Reversal which occurred on July 15, 2008.

Expenses

Our total expenses for the three months ended March 31, 2009 were $5,000 which reflects professional fees and expenses related to maintaining the Company’s compliance with its obligations under the Securities Exchange Act of 1934, as amended. Our total expenses for the three months ended March 31, 2008 were $0 which reflects the discontinued operations of our Israeli subsidiary as a result of the Acquisition Reversal which occurred on July 15, 2008.

Interest Income

During the three months ended March 31, 2009 we recorded $2,000 of interest income in connection with the short term bridge loan we made on February 11, 2009 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 31, 2009.

Profit (Loss)

Our loss for the three month period ended March 31, 2009 was $3,000 which reflects the items shown above.

Liquidity and Capital Resources

As of March 31, 2009, total current assets were $217,000 and total current liabilities were $21,000. As of March 31, 2009, the Company had a cash balance of $44,000.

We believe that our existing cash, the repayment of the short term bridge loan to our stockholder, together with potential revenue from the licenses received in the Acquisition Reversal will be sufficient to support our operations through the end of 2009; 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 end of 2009. 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.

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 3.

Quantitative and Qualitative Disclosure about Market Risk

Not required for Smaller Reporting Companies

Item 4.

Controls and Procedures

Not required for Smaller Reporting Companies

Item 4T.

Controls and Procedures

Evaluation of Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer, who also acts as our Chief Financial Officer, the Company evaluated the effectiveness of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The evaluation considered the procedures designed to provide assurance ensure that information required to be disclosed by us in the reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures were not effective at that reasonable assurance level, as of March 31, 2009.

Our internal control over financial reporting was 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.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the three months ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

Not Applicable.

Item 1A.

Risk Factors.

Not Applicable.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Not Applicable.

Item 3.

Defaults Upon Senior Securities.

Not Applicable.

Item 4.

Submission of Matters to a Vote of Security Holders.

Not Applicable.

Item 5.

Other Information.

Not Applicable.

Item 6.

Exhibits.

Exhibit
Number		Description

31		PEO and PFO certifications required under Section 302 of the Sarbanes-Oxley Act of 2002

32		PEO and PFO certifications required under Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements 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: May 20, 2009

	BAY ACQUISITION CORP.

	By:	/s/ Paul Goodman
		Paul Goodman
		President and Chief Financial Officer