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



                                   FORM 10-KSB



         |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005.

         |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .

                                   ----------

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


             NEVADA                                  77-0571784
 (State or Other Jurisdiction of        I.R.S. Employer Identification Number
  Incorporation or Organization)



                                 40 WALL STREET
                                   58TH FLOOR
                            NEW YORK, NEW YORK 10005
              (Address of Principal Executive Offices and Zip Code)

                    Issuer's Telephone Number: (866) 838-1102



Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.001 per share


<PAGE>


Indicate by mark (X) 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.

         YES  |X|                NO |_|

Indicate by mark (X) if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. |_|

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES |_| NO |X|


Issuer's revenues for its most recent fiscal year: $807,000.

Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on April 3, 2006:
$17,128,664

Number of shares outstanding of each of the registrant's classes of common stock
as of March 28, 2006: Common Stock: 55,606,331

DOCUMENTS INCORPORATED BY REFERENCE:

List hereunder the following documents if incorporated by reference and the Part
of the 10-KSB into which the document is incorporated.

None


                                       2
<PAGE>


                                SECURELOGIC CORP.
                         2005 FORM 10-KSB ANNUAL REPORT
                                Table of Contents


Trademarks/Definitions

PART I
Item 1.      Business                                                          4
Item 2.      Properties                                                       11
Item 3.      Legal Proceedings                                                11
Item 4.      Submission of Matters to a Vote of Security Holders              11

PART II
Item 5.      Market for the Registrant's Common Equity and Related
             Stockholder Matters                                              11
Item 6.      Management's Discussion and Analysis or Plan of Operations of
             Financial Condition and Results of Operations                    12
Item 7.      Financial Statements                                             18
Item 8.      Changes In and Disagreements With Accountants on Accounting
             And Financial Disclosure                                         19
Item 8a.     Controls and Procedures                                          19
Item 8b.     Other Information                                                20

PART III
Item 9.      Directors and Executive Officers of the Registrant               20
Item 10.     Executive Compensation                                           23
Item 11.     Security Ownership of Certain Beneficial Owners and Management   25
Item 12.     Certain Relationships and Related Transactions                   26
Item 13.     Exhibits, Financial Statements, and Reports on Form 8-K          28
Item 14.     Principal Accountant Fees and Services                           29
Signatures                                                                    30


TRADEMARKS/DEFINITIONS

All trademarks, service marks or trade names referred to in this Form 10-KSB are
the property of their respective owners. Except as otherwise required by the
context, all references in this Form 10-KSB to (a) "we," "us," "our," the
"Company" or "SecureLogic" refer to the consolidated operations of SecureLogic
Corp., a Nevada corporation, (b) "you" refers to the readers of this Form
10-KSB, and (c) the "Web" refers to the World Wide Web.


                                       3
<PAGE>


PART I

ITEM 1.  BUSINESS

SecureLogic Corp. (the "Company" or "SecureLogic") specializes in airport
security software and systems, baggage handling systems, material handling
systems and integration of warehousing and distribution solutions. The Company
develops and markets software and systems that manage the security screening
operations of baggage and people through airports, as well as, systems for
materials handling and warehouse management. SecureLogic's airport security
systems integrate unique security methodologies with state-of-the-art screening
and baggage handling technologies, providing a comprehensive baggage screening
and passenger screening security solution.

Our principal executive offices are located 40 Wall Street, 58th Floor, New
York, New York 10005 and our telephone is (866) 669-6120. Our Web site can be
found at www.secure-logic.net.

Company History

Formerly, the Company provided software products that served the consumer, small
business and corporate enterprise market through two wholly-owned subsidiaries,
then-known as Aladdin Systems, Inc. ("Aladdin Systems") and Aladdin Enterprise
Solutions, Inc. ("Aladdin Enterprise"). In April 2004, in two unrelated
transactions, we sold our operating subsidiaries. On November 11, 2004, we then
changed our corporate name to "Monterey Bay Tech, Inc."

On December 20, 2004, we signed a Letter of Intent to acquire SpaceLogic, Ltd.,
a privately held Israeli corporation ("SpaceLogic"). On February 17, 2005, we
executed a Stock Purchase Agreement with SpaceLogic and its stockholders,
pursuant to which we agreed to purchase all of the issued and outstanding
capital stock of SpaceLogic from its stockholders (the "SpaceLogic
Transaction").

On May 11, 2005, we changed our name to SecureLogic Corp. On May 12, 2005, we
completed the SpaceLogic Transaction by acquiring all of the issued and
outstanding capital stock of SpaceLogic, making SpaceLogic a wholly-owned
subsidiary, 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, as the shareholders
of SpaceLogic (as a group) received the largest ownership interest in the
Company, SpaceLogic was determined to be the "accounting acquirer" in the
reverse acquisition. As a result, the historical financial statements of the
Company were replaced with the historical financial statements of SpaceLogic.
Simultaneously, we also acquired a privately-held interest in SpaceLogic's
majority-owned SecureLogic, Ltd. subsidiary.

Current Business Focus

Since the acquisition of SpaceLogic, we have focused our business primarily on
the airport security screening market. We develop and market software products
for the management, control and monitoring of complex security screening
operations. SecureLogic's systems utilize proprietary methodologies to manage
and direct passenger and baggage security screening systems. Our iScreen
security screening software and solutions are integrated with screening
equipment, passenger data, baggage handling and other material handling systems,
and information systems at various terminals. Our comprehensive baggage
screening and passenger screening solutions are designed for airports, seaports,
border-crossings and other complex transfer points. Although the Company has now
refocused its business towards being a software developer and systems integrator
specializing in airport security screening systems, we continue to maintain our
legacy airport baggage handling and warehouse and distribution center management
activities.


                                       4
<PAGE>


Our business is divided into three product groups: SecureLogic and SpaceLogic
and ChainLogic, each devoted to one of our three primary markets:

         Product Group     Product Line
         -------------     ------------

         SecureLogic       Airport, Seaport and Border Crossing
                           Security Screening Systems

         SpaceLogic        Baggage Handling and Material Handling Systems

         ChainLogic        Warehouse and Distribution Center Management Systems.

SecureLogic Products and Services

The SecureLogic iScreen product line provides innovative control software
systems for efficient and effective airport checked baggage screening and
passenger screening. It automates traditional human screening procedures to
enable the deployment of large-scale screening operations for airports,
border-crossings and other complex transfer points. Our iScreen software systems
integrate unique security methodologies with state-of-the-art screening and
baggage handling technologies, providing a comprehensive control package for
baggage and passenger screening operations. iScreen ensures efficient and
cost-effective automation of security screening and baggage handling for an
airport's checked baggage handling operation and enhances the capabilities of
airports to meet their significant managerial and control challenges.

The iScreen software differs from most hold baggage handling and screening
systems by providing a unique screening process for each individual bag. This
core feature ensures that screening intensity for each checked bag fits the
assessed risk level of the bag and the passenger associated with the bag. Our
proprietary algorithms generate unique screening routing directions for each
bag, according to the specific, individualized risk level parameters which can
be designated by the user, retrieved by the software from internal and external
sources (e.g. CAPPS, APSTM) or any combination thereof. Thus, individual baggage
can be assigned different security procedures based upon risk parameters such as
destination, airline or even random bag designation for more stringent searches.
Once a screening procedure is set for a bag, the system then appropriately
routes the bag to be processed in accordance with assigned such risk level to
accomplish appropriate screening.


                                       5
<PAGE>

Since airport screen operations are not uniform, we have developed different
version of iScreen to meet the needs of different airports.

         iScreen-Line - for checked baggage screening operations integrated with
airport terminal fully automated baggage handling systems.

         iScreen-Node - for non-automated hold baggage screening operations,
typically in airport terminal lobbies, including special baggage screening
situations (e.g. odd-shaped and oversized bags, and curbside check-in.).

         iScreen-Checkpoint (currently in development) - for carry-on baggage
and passenger screening at airport terminal security checkpoints.

         Among the innovative features and functionality of all the iScreen
products are the following:

         o iScreen products afford airport security managers the flexibility to
easily and dynamically adjust screening procedures according to risk level and
in response to operational considerations such as load level, systems capacity
and available workforce.

         o iScreen integrates the various screening operations within the
checked baggage security system with the routing procedures necessary to safely
screen and transport checked baggage through an airport's baggage handling
operation. In the future, it will provide similar functionality for the
screening of passengers and their carry-on items.

         o iScreen supports the operation of existing explosive detection
systems, explosive trace detectors and advanced technology screening machines.
as well as. baggage handling controls and hardware.

         o iScreen's modular programming structure ensures rapid and economical
deployment. Proprietary algorithms are utilized to establish a specific routing
plan for each bag through the airport's various explosive detection systems and
manual screening operations.

         o iScreen combines proprietary software with third party databases and
existing operational procedures to provide airport security managers with the
advanced easy-to-use tools they need to optimize the screening process for each
and every bag.

         o iScreen allows airport security managers to monitor real-time
screening loads, screening equipment and screener availability for the
management and optimization of resources and screening capacities, at low and
high load intervals.

         Additional product applications for iScreen include efficient and
effective screening of baggage in terminals at seaports, border-crossings and
other complex transfer points.

         We are working closely with government regulators and airport
authorities for the deployment of iScreen in several major airports. In January,
2005, the United States Transportation Security Administration ("TSA") an agency
of the U.S. Department of Homeland Security, issued a Notice of Intent To Issue
Single Source Contract to SpaceLogic to install iScreen Node in a major US
metropolitan airport for a pilot program. In August, 2005, the TSA awarded us a
single source contract to conduct a pilot program of our iScreen Node aviation
security software at a major U.S. airport. It is expected that the system will
be operational by mid-2006.


                                       6
<PAGE>


SPACELOGIC BAGGAGE HANDLING AND EARLY BAGGAGE SYSTEMS

         Our software toolkits and advanced methodologies facilitate the
streamlined implementation and control of integrated baggage handling systems,
including superior solutions for storage of early check-in baggage. We provide
integrated systems that combine automated equipment controlled by our software
with the most advanced third party hardware systems, allowing for rapid
implementation of airport baggage handling systems. Special emphasis is given to
high quality and on-time supply of fully operational turnkey systems. Our
baggage handling software, BHLogic, and our early checked bag software, EBLogic,
are complementary to our iScreen product line.

         BHLogic - The BHLogic software toolkit controls and routes airport
baggage from the point where it enters the baggage conveyor system to the point
where baggage is loaded into containers destined for the aircraft. BHLogic also
handles incoming baggage, routing it to claim devices where passengers pick up
their baggage, or to transfer flights. The BHLogic software is implemented as a
toolkit that integrates into most hardware systems, allowing for rapid
implementation of software control systems for existing airport baggage handling
and transfer systems. BHLogic is compatible with airport subsystems such as
sorters (tilt trays, pushers, transfers), conveyors, automated early bag
storage, as well as automated identification systems (bar-code and RFID).

         EBLogic - The EBLogic software product focuses on early bag storage
(luggage checked-in in advance of a flight) and serves as an integrated buffer
for early checked and transferred baggage. The EBLogic software is implemented
as a toolkit, integrating AS/RS (Automated Storage and Retrieval Systems) with
automated baggage handling systems.

CHAINLOGIC - WAREHOUSE AND DISTRIBUTION CENTER MANAGEMENT SYSTEMS

         Our recently created ChainLogic subsidiary provides comprehensive
business and material handling solutions that integrate computer systems,
material handling equipment and storage equipment together with human resources
to ensure optimized warehouse and distribution center management. We have
previously experienced long term successful cooperation with some of the major
international baggage and material handling system manufacturers, including FKI
Logistex and White Systems.

         FlowX - ChainLogic's warehouse management system software solution
optimizes the logistic operations of warehouses, distribution centers,
retailers, archives and record storage facilities. It is compatible with
advanced distribution and picking systems such as: carousels (horizontal and
vertical), vertical storage modules, sorters, conveyors and RF hand held
terminals. FlowX can be rapidly customized to suit manufacturers' requirements
for the most advanced systems. FlowX can be integrated with sophisticated
hardware such as White System's Lightree III and Sortbar III, a light-directed
picking system, to increase accuracy and speed on systems that are based on
horizontal and vertical carousels. FlowX easily integrates with sorting and
dispatching systems such as those designed by FKI Logistex. The software is also
available on a licensed basis to system integrators or equipment manufacturers.


                                       7
<PAGE>


SERVICES

We provide a wide range of services to clients, on either a time and materials
or fixed price basis, related to the engineering, design and implementation of
security screening systems and material handling systems, project management of
security screening and material handling projects, installation, structural and
electro/mechanical services for projects and support services in the form of
24-hour hot-line, remote support by modem, periodic inspections, preventive
maintenance and on-site support.

PRODUCT SUPPORT

We employ three full-time support personnel who provide technical support
services to customers by email, on-site consultation, telephone and fax. Support
services include resolving issues related to the performance of our systems and
its interoperability with user's existing computer systems and software, solving
problems with software operation and suggesting solutions to computing issues.

SALES AND MARKETING

SecureLogic and SpaceLogic Products

The SpaceLogic and SecureLogic product suites are sold directly by our in-house
sales and marketing personnel and through joint ventures with strategic partners
from relevant industries. Generally, in the future, we intend to partner with
suppliers of baggage handling hardware systems, established airport security
vendors and system integrators to supply our flagship iScreen-Line software
package as well as providing integration, adaptation and system configuration
services, as required.

ChainLogic Products

The Company's ChainLogic warehouse management systems are sold primarily through
our own direct sale channels. For sales within North America and Western Europe,
we intend to seek strategic alliances with value added integrators and
consulting firms that develop and deliver value-added services around our
products.

PRODUCT DEVELOPMENT

We utilize internal resources as well as contractors for the development of our
software products. Our future financial performance will depend, in part, on the
successful development of enhanced versions of our existing software products,
on the development, completion, and introduction of new products and customer
acceptance of those products. There is no assurance that we will avoid
difficulties that could delay or prevent the successful development, or
marketing of new products and/or enhancements of existing products. There also
can be no assurance that such products will yield positive results or that such
results can be obtained on a timely basis or without the expenditure of
substantial funds.


                                       8
<PAGE>


COMPETITION

We believe that we currently have no direct competitors for our iScreen product
lines and the TSA has awarded us a single source contract to conduct a pilot
program of our iScreen Node aviation security software at a U.S. airport. There
can be no assurance that other companies involved in systems integration of
baggage handling systems will not seek to develop competing software products.

We have numerous competitors for our baggage handling services and systems
integration business in the form of the various baggage handling equipment
providers, system integrators, explosive detection system providers and other
detection equipment manufacturers.

Our ChainLogic subsidiary has numerous competitors for its warehouse management
software products including major software vendors such as SAP, Oracle,
Manhattan Associates, Catalyst and Red Prairie.

GOVERNMENT REGULATION

We are not currently subject to direct government regulation, other than
pursuant to securities laws and the regulations thereunder applicable to all
publicly owned companies, and laws and regulations applicable to businesses
generally and other then laws and regulations applicable to businesses
contracting with U.S. and international governmental agencies.

PROPRIETARY RIGHTS

We regard the protection of our copyrights, service marks, trademarks and trade
secrets as critical to our future success. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect proprietary rights in products and
services. Software products are generally protected against copying pursuant to
the U.S Copyright Act, international copyright treaties, and license agreements.

We regard our software as proprietary and attempt to protect it with copyrights,
trade secret laws, and internal nondisclosure safeguards, as well as
restrictions on disclosure and transferability that are incorporated into
software license agreements. Copyrights to software products run for a period of
at least 95 years from the first creation of the work in accordance with the
provisions of the US Copyright Act. We license our software products to
customers rather than transferring title. Despite these restrictions, it may be
possible for competitors or users to copy aspects of the our products or to
obtain information that SpaceLogic regards as trade secret. Computer software
generally can be patented only with difficulty and existing copyright laws
afford only limited practical protection. On a regular basis, we evaluate our
development efforts to determine if patent protection would be applicable.
Patents run for a period of at least 20 years from the application date of the
patent. We currently have one US patent application pending for screening
systems for objects in transit.


                                       9
<PAGE>


Although we do not believe that any of our products infringe the proprietary
rights of third parties, there can be no assurance that third parties will not
claim infringement by our products with respect to past, current or future
technologies. Any such claim, whether meritorious or not, could be
time-consuming, result in costly litigation, cause software upgrade delays or
require us to enter into royalty or licensing agreements. Such royalty or
licensing agreements might not be available on terms acceptable to us or at all,
as a result, any such claim could have a material adverse effect upon our
business, results of operations and financial condition.

SUPPLIERS

We produce our own software and typically do not depend suppliers for any part
of our software product offerings. On occasion, in connection with our systems
integration business, we purchase third party equipment and services for baggage
handling such as conveyor sections, switching equipment, control panels, etc.
Such products are available from numerous third party manufacturers and
distributors.

EMPLOYEES

As of December 31, 2005, we employed 23 full-time employees in the following
departments: nine in research and development, eight in marketing, sales and
support and six in executive, general and administrative.

Our future success will depend in part on our continued ability to attract,
integrate, retain and motivate highly qualified technical and managerial
personnel and upon the continued service of our senior management and key
technical personnel. The competition for qualified personnel in our industry and
geographical location is intense and there can be no assurance that we will be
successful in attracting, integrating, retaining and motivating a sufficient
number of qualified personnel to conduct our business in the future. From time
to time, we also employ independent contractors to support our research and
development, marketing, sales, support and administrative organizations. We have
never had a work stoppage, and no employees are represented under collective
bargaining agreements. We considers our relations with our employees to be good.

SUBSIDIARIES

SecureLogic, Inc. (100% owned)
SpaceLogic, Ltd. (100% owned)
ChainLogic, Ltd. (55% owned)
SecureLogic, Ltd. (100% owned)


                                       10
<PAGE>


FORWARD-LOOKING STATEMENTS

The Company or management may make or may have made certain forward-looking
statements, orally or in writing, such as those within Management's Discussion
and Analysis contained in its various SEC filings. The Company wishes to ensure
that such statements are accompanied by meaningful cautionary statements, so as
to ensure to the fullest extent possible the protections of the safe harbor
established in the Private Securities Litigation Reform Act of 1995. Such
statements are therefore qualified in their entirety by reference to and are
accompanied by the following discussion of certain important factors that could
cause actual results to differ materially from those described in such
forward-looking statements. None of the Company's forward-looking statements
should be relied upon as a prediction of actual results.

The Company faces risks and uncertainties that could render actual events
materially different than those described in our forward-looking statements.
These are described in the Risks and Uncertainties section of the Management's
Discussion and Analysis.

ITEM 2.  PROPERTIES

Our offices consist of approximately 4,100 square feet of office space in
Netanya, Israel. This facility is leased pursuant to a lease expiring in 2008,
which is earlier terminable upon six months notice. The annual rent is
approximately $40,000. In addition, we maintain, on a month to month basis,
executive offices in New York, New York at 40 Wall Street, 58th Floor. We
believe that our current office space is sufficient to cover foreseeable future
growth.

ITEM 3.  LEGAL PROCEEDINGS

Our SpaceLogic, Ltd. subsidiary has brought an action against a former joint
venture partner for breach of contract in the United States District Court for
the Eastern District of New York, entitled "SpaceLogic Ltd. v. Vinci Airports
US, Inc. 02 Civ. 3957 (JS) (ARL)". The action seeks damages against Vinci
Airports US, Inc. in an amount in excess of $50 million for breach of a joint
venture agreement between the parties. The defendant has filed a counterclaim
against SpaceLogic in the amount of $418,000 for alleged breach of the same
agreement. The parties have recently entered into a settlement agreement
pursuant to which Vinci Airports US will pay to the Company the sum of $250,000
and forgive the $418,000 Vinci Airports US alleged was owed by SpaceLogic.

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

None

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of December 31, 2005, there were 64 stockholders of record. The Company
believes that it has approximately 500 beneficial stockholders.


                                       11
<PAGE>


The Company's common stock trades on the NASDAQ Over The Counter Bulletin Board
under the symbol: SLGI.

The following table sets forth the range of high and low bid prices per share of
common stock as provided by Yahoo Finance. The quotations shown below reflect
inter-dealer prices, without mark-up, markdown or commissions and may not
present actual transactions.

                                                 Common Stock
                                           Low               High
                                          ------           -------
      Quarter ended:
      -------------
      March 31, 2004                     $  0.26           $  0.57
      June 30, 2004                         0.54              0.67
      September 30, 2004                    0.23              0.43
      December 31, 2004                     0.25              0.95
      March 31, 2005                        0.55              1.34
      June 30, 2005                         1.22              1.95
      September 30, 2005                    1.25              1.80
      December 31, 2005                     0.85              1.25

The Company has never declared, nor has it paid, any cash dividends on its
Common Stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following table sets forth certain consolidated statements of operations
data for the periods indicated. These operating results are not necessarily
indicative of the results for any future period.


                                                   YEAR ENDED DECEMBER 31
                                                 (IN THOUSANDS, EXCEPT PER
                                                       SHARE AMOUNTS)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:           2005       2004

REVENUES                                           $   807    $ 3,510
COSTS AND EXPENSES:
                                                       674      1,928
COST OF REVENUES
SELLING AND MARKETING EXPENSE                          943        549
RESEARCH AND DEVELOPMENT COSTS, NET                  1,142        485
AMORTIZATION OF INTANGIBLE ASSET                     1,579
GENERAL AND ADMINISTRATIVE EXPENSES                    965        632
ACQUISITION EXPENSES                                   214          0
TOTAL COSTS AND EXPENSES                             5,517      3,594

OPERATING LOSS                                      (4,710)       (84)
FINANCIAL EXPENSES, NET                                (20)       (10)
LOSS BEFORE TAXES ON INCOME                         (4,730)       (94)
TAXES ON INCOME                                        (20)       (37)
NET LOSS                                            (4,770)      (131)
BASIC AND DILUTED NET INCOME PER SHARE              (0.120)    (0.012)


                                       12
<PAGE>


The following table sets forth, as a percentage of total revenues, certain
consolidated statements of operations data for the periods indicated. These
operating results are not necessarily indicative of the results for any future
period.


                                               Year ended December 31
                                                  (in Percentage)

Consolidated Statements of Operations             2005        2004
Data:

Revenues                                           100%       100%
Costs and expenses:
                                                    84%        55%
Cost of revenues
Selling and marketing expense                      117%        16%
Research and development costs                     142%        19%
Amortization of Intangible Asset                   196%
General and administrative expenses                120%        22%
Acquisition Expenses                                27%         0%
Total costs and expenses                           684%       102%
Operating loss                                    (584%)      (12%)
Financial expenses, net                             (2%)        0%

Loss before taxes on income                       (586%)      (13%)
Taxes on income                                     (5%)       (1)%
Net loss                                          (591%)       (4%)


                                       13
<PAGE>


REVENUES AND COST OF REVENUES

Total revenues for the year ended December 31, 2005 decreased by 77% to $807,000
from $3,510,000 for the year ended December 31, 2004. The primary reason for the
decrease in revenues was the completion during 2004 of a long-term maintenance
and integration services contract which expired in 2004, as well as, the
Company's decision to focus on sales of its SecureLogic secure advanced baggage
handling systems to United States airports, which did not result in significant
sales, versus the sale of maintenance and integration services to Israeli
customers.

Our revenues for the year ended December 31, 2005 broken down by product group
are as follows:

                  SecureLogic               $100,000
                  SpaceLogic                $325,000
                  ChainLogic                $382,000

Cost of revenues for the year ended December 31, 2005 decreased by 65% to
$674,000 from $1,929,000 for the year ended December 31, 2004. The decrease in
cost of revenues in 2005 was primarily attributable to the decrease in revenue.

Gross profit decreased by 92% for the year ended December 31, 2005 to $133,000
from $1,582,000 for the same period in 2004. The decrease in gross profit in
2005 was primarily attributable to the decrease in revenue which was not
accompanied by a proportionate decrease in costs. For the year ended December
31, 2005, gross profit as a percentage of sales was 16% and for the comparable
period in 2004 was 45%. This decrease in our gross profit margin is primary due
to a loss of $215,000 incurred on one strategic customer project.

OPERATING EXPENSES

Operating expenses consist of (a) research and development expenses, (b) sales
and marketing expenses, (c) general and administrative expenses and (d)
acquisition expenses. Operating expenses for the year ended December 31, 2005
were $4,843,000 as compared to $1,666,000 for the similar period in 2004.
Operating expenses as a percentage of revenue increased from 47% in 2004 to 600%
in 2005. The increase in operating expenses was primarily due to (i) accrual of
additional non-cash severance expense in the amount of approximately $300,000
required by Israeli law, which expenses were associated with a change in
January, 2005, in the method that compensation is paid to senior management,
(ii) acquisition expenses in the amount of $214,000, and (iii) amortization of
certain intangible assets in connection with our May, 2005 acquisition of
SpaceLogic in the amount of $1,579,000.

Set forth below are the details related to the components categories of
operating expenses.


                                       14
<PAGE>


RESEARCH AND DEVELOPMENT

Research and development expense for the year ended December 31, 2005 increased
by 461% to $2,721,000 from $485,000 for the year ended December 31, 2004.
Research and development expense as a percentage of revenue increased from 14%
in 2004 to 337% in 2005. The increase in research and development expenses
reflects the hiring of additional research and development employees as a result
of the Company's decision to invest in new products related to its proprietary
advanced security screening and baggage handling systems, increases in salary
and salary related costs and the amortization of certain intangible assets in
connection our May, 2005 acquisition of SpaceLogic.

SALES AND MARKETING

Sales and marketing expense for the year ended December 31, 2005 increased by
72% to $943,000 from $549,000 for the year ended December 31, 2004. Sales and
marketing expense as a percentage of revenue increased from 16% in 2004 to 117%
in 2005. The increase in sales and marketing expenses during 2005 reflects
company's decision to expand selling activities for its proprietary advanced
security screening and baggage handling systems to United States based airports
and reflects increases in salary and salary related costs.

GENERAL AND ADMINISTRATIVE

General and administrative expense for the year ended December 31, 2005
increased by 53% to $965,000 from $632,000 for the year ended December 31, 2004.
General and administrative expense as a percentage of revenue increased from 18%
in 2004 to 120% in 2005. The increase in general and administrative expenses is
attributable mainly to increases in salary and salary related costs and costs
associated with being a public company, specifically, legal, investor relations
and audit expenses.

ACQUISITION EXPENSES

Acquisition expenses for the year ended December 31, 2005 were $214,000. There
were no acquisition expenses for the year ended December 31, 2004.

OPERATING INCOME

Operating income decreased to a loss of $4,710,000 for year ended December 31,
2005 as compared to a loss of $84,000 for the year ended December 31, 2004, a
decrease of $4,626,000. This decrease is a result of company's decision to focus
on development and sales of its proprietary secure advanced baggage handling
systems and to the completion during 2004 of a long-term maintenance and
integration services contract, which expired in 2004.

FINANCIAL INCOME/EXPENSES

Financial expenses for the year ended December 31, 2005 increased by 100% to
$20,000 from $10,000 for the year ended December 31, 2004. The increase in
financial expenses in 2005 is attributable to financial expenses recorded due to
a secured bridge note, taken in February 2005, from an affiliated party in the
amount of $500,000, which was paid in full in May, 2005.

PROVISION FOR INCOME TAXES

Taxes on income for the year ended December 31, 2005 decreased by 46% to
$20,000 from $37,000 for the year ended December 31, 2004.


                                       15
<PAGE>


NET LOSS AND NET LOSS PER SHARE Net

loss for the year ended December 31, 2005 was $4,750,000 or $0.120 per share as
compared to a net loss of $131,000 or $0.012 per share for the year ended
December 31, 2004, a decrease of $4,619,000. This decrease is due to the factors
discussed above.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2005, total current assets were $3,702,000 and total current
liabilities were $2,305,000. At December 31, 2005, we had a working capital
surplus of $1,397,000 and an accumulated deficit of $5,590,000. At December 31,
2005, the Company had a cash balance of $3,327,000. The Company expects that its
net working capital surplus will decrease as a result of increased US marketing
efforts and increased research and development efforts.

Net cash provided by operating activities during the year ended December 31,
2005 was $3,204,000 as compared to net cash used in operating activities of
$867,000 in the comparable period in 2004. The major effect on operating cash
flows for the period relative to the prior period was a net loss of $4,750,000
relative to a net loss of $131,000 partly offset by increase of trade payables
of $385,000 and accrued severance pay, net of $337,000 in 2005, and depreciation
and amortization of $1,618,000 in 2005.

Net cash provided by investment activities was $4,519,000 for the year ended
December 31, 2005 as compared to $320,000 for the comparable period in 2004. The
primary reason for the increase in net cash provided by investment activities
was the receipt of cash from a subsidiary in connection with the reverse
acquisition on May 2005.

Net cash provided by financing activities for the year ended December 31, 2005
was $1,995,000 as compared to $39,000 for the comparable period in 2004. The
increase was a result of the issuance of common stock to investors who invested
$2,000,000 into the Company in May 2005.

The Company believes that its existing cash together with cash generated from
operations should be sufficient to support its operations for the next 12
months; provided that, revenues from our baggage handling, warehouse management
and materials handling legacy businesses return to historical levels. However,
there can be no assurance, based upon our calendar year 2005 historical results,
that we will not require significant amounts of additional capital in the
foreseeable future because of either market conditions or management decisions.
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. The
incurrence of 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.


                                       16
<PAGE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of condensed financial statements in conformity with the
accounting principles generally accepted in the United States requires us to
make estimates and assumptions that affect reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates and assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results could differ materially form
those estimates under different assumptions.

We believe that the following accounting policies are the most critical to our
financial statements since these policies require significant judgment or
involve complex estimates to the portrayal of our financial condition and
operating results:

o Revenue recognition

              1. Revenues from sale of software and products

                     Revenues from sale of software are recognized in accordance
                     with Statement of Position 97-2, "Software Revenue
                     Recognition", as amended ("SOP 97-2"). SOP 97-2 generally
                     requires revenue earned on software arrangements involving
                     multiple elements to be allocated to each element based on
                     the relative fair value of the elements. However, the
                     Company has adopted Statement of Position 98-9,
                     "Modification of SOP 97-2, Software Revenue Recognition
                     with Respect to Certain Transactions", ("SOP 98-9"). SOP
                     98-9 requires that revenue be recognized under the
                     "residual method" when Vendor Specific Objective Evidence
                     ("VSOE") of fair value exists for all undelivered elements
                     and VSOE does not exist for all of the delivered elements.
                     Under the residual method any discount in the arrangement
                     is allocated to the delivered elements.

                     Revenues from sale of software license are recognized when
                     delivery of the product has occurred, the fee is fixed or
                     determinable, collectibility is probable, vendor specific
                     objective evidence exists to allocate total fees to
                     elements of the arrangement and persuasive evidence of an
                     arrangement exists.

                     The Company also generated revenues from products sales
                     which are recognized in accordance with Staff Accounting
                     Bulletin No. 104 "Revenue Recognition" when delivery has
                     occurred and, where applicable, after installation has
                     occurred, there is persuasive evidence of an agreement, the
                     fee is fixed or determinable and collection of the related
                     receivable is probable and no further obligations exist. In
                     cases where delivery has occurred but the required
                     installation has not been performed, the Company does not
                     recognize the revenue until the installation is completed.


                                       17
<PAGE>


              2. Revenues from maintenance services and support Revenues from
                 maintenance services and support are recognized on a
                 straight-line basis over the term of the maintenance services
                 and support agreement.

            Our audited financial statements as of December 31, 2005 contain
            further discussions on our critical accounting policies and
            estimates.

            We have no off-balance sheet arrangements.

            RISKS AND UNCERTAINTIES

            Risks and uncertainties for the Company include, but are not limited
            to:

                  o     Adoption by airports of our iScreen product line
                  o     Failure to successfully complete TSA and other
                        government pilot projects and approval processes.
                  o     Potential product obsolescence of our legacy products

            The preceding statements under "Management's Discussion and Analysis
            of Financial Condition and Results of Operations" which are not
            historical facts are forward-looking statements. These
            forward-looking statements involve risks and uncertainties that
            could render them materially different, including, but not limited
            to, the risk that new products and product upgrades may not be
            available on a timely basis, the risk that such products and
            upgrades may not achieve market acceptance, the risk that
            competitors will develop similar products and reach the market
            first, and the risk that we would not be able to fund its working
            capital needs from cash flow.

ITEM 7.  FINANCIAL STATEMENTS

Index to Item 7: Financial Statements                                       Page

Report of Independent Registered Public Accounting Firm
  Brightman Almagor & Co.                                                   F-1
Report of Independent Registered Public Accounting Firm
  Kost Forer Gabbay & Kasierer                                              F-2
Balance Sheet                                                               F-3
Statements of Operations                                                    F-4
Statements of Stockholders' Equity                                          F-5
Statements of Cash Flows                                                    F-6
Notes to Financial Statements                                               F-8


                                       18
<PAGE>



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                             TO THE SHAREHOLDERS OF

                                SECURELOGIC CORP.




         We have audited the accompanying consolidated balance sheet of
Securelogic Corp. ("the Company") and its subsidiaries as of December 31, 2005,
and the related consolidated statements of operations, changes in shareholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.


         We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. 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 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 consolidated financial statements referred to
above, present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries as of December 31, 2005, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with U.S. generally accepted accounting principles.


Brightman Almagor & Co.
Certified Public Accountants
A member firm of Deloitte Touche Tohmatsu



 Tel-Aviv, Israel
 March 19, 2006


                                       F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                             TO THE SHAREHOLDERS OF

                                 SPACELOGIC LTD.



       We have audited the accompanying consolidated balance sheets of
Spacelogic Ltd. ("the Company") and its subsidiary as of December 31, 2003 and
2004, and the related consolidated statements of operations, changes in
shareholders' deficiency and cash flows for each of the three years in the
period ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
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, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

       In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the consolidated financial position of
the Company and its subsidiary as of December 31, 2003 and 2004 and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States.







Haifa, Israel                                 KOST FORER GABBAY & KASIERER
March 1, 2005                               A Member of Ernst & Young Global


                                      F-2
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                           CONSOLIDATED BALANCE SHEET
                 (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


                                                                DECEMBER 31,
                                                       NOTE         2005
                                                     -------    ------------

CURRENT ASSETS:
  Cash and cash equivalents                                3    $      3,327
  Short-term bank deposits                                 4             133
  Trade receivables                                       81
  Other accounts receivable                                5             161
                                                                ------------
                                                                       3,702
                                                                ------------

LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:

  Long-term deposit                                       20
  Notes receivable                                         6             130
  Severance pay funds                                      2             170
                                                                ------------
                                                                         320
                                                                ------------

PROPERTY AND EQUIPMENT, NET                                7             217
                                                                $      4,239
                                                                ============

CURRENT LIABILITIES:
  Trade payables                                     $   616
  Other accounts payable                                   8             960
  Deferred Tax Liability                                  10             729
                                                                ------------

                                                                       2,305
                                                                ------------
LONG-TERM LIABILITIES:
  Long-term loans                                         10               7
  Accrued severance pay                                    2             657
                                                                ------------

                                                                         664
                                                                ------------

GUARANTEES, CHARGES, CONTINGENCIES AND COMMITMENTS                        11

SHARE HOLDERS' EQUITY

Share capital                                                             12
Common stock of $ 0.001 par value -
Authorized: 100,000 shares;
  Issued and outstanding: 55,606,331 shares                               56
  Additional paid-in capital                                           6,797
  Stock based compensation                                                (9)
Accumulated other comprehensive income:
  Foreign currency translation adjustments                                16
Accumulated deficit                                                   (5,590)
                                                                ------------
                                                                       1,270
                                                                ------------
                                                                $      4,239
                                                                ============

               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                      F-3
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                        FOR THE YEAR ENDED
                                                                           DECEMBER, 31
                                                                  ----------------------------
                                                       NOTE           2005            2004
                                                   ------------   ------------    ------------
<S>                                                          <C>  <C>             <C>
Revenues                                                     14   $        807    $      3,510

Cost of revenues                                                           674            1928
                                                                  ------------    ------------

Gross profit                                                               133           1,582
                                                                  ------------    ------------

Research and development costs, net                                      2,721             485
Selling and marketing expenses                                             943             549
General and administrative expenses                                        965             632
Acquisition Expenses                                                       214              --
                                                                  ------------    ------------
                                                                         4,843           1,666

Operating loss                                                          (4,710)            (84)

Financial expenses, net                                                    (20)            (10)
                                                                  ------------    ------------

Loss before taxes on income                                             (4,730)            (94)
Taxes on income                                              10            (20)            (37)
                                                                  ------------    ------------

Net loss                                                          $     (4,750)   $       (131)
                                                                  ============    ============
Basic and diluted net loss per share                                    (0.120)         (0.012)
                                                                  ============    ============
Weighted average number of common shares used in
  computing basic and diluted net loss per share                    39,481,693      11,019,266
                                                                  ============    ============
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                      F-4
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                     STATEMENTS OF SHAREHOLDERS' DEFICIENCY
                 (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                            NUMBER OF
                                             COMMON
                                             SHARES                       ADDITIONAL         DEFERRED
                                             $0.001           SHARE         PAID-IN         STOCK-BASED
                                            PAR VALUE        CAPITAL        CAPITAL        COMPENSATION
                                          -------------   -------------   -------------    -------------
<S>                                          <C>          <C>             <C>              <C>
Balance as of January 1, 2005                11,019,267   $          11   $         (11)   $          --

  Reverse Acquisition adjustments            31,589,700              32           3,178               --

  Shares issued to consultants for non-
    Cash consideration, during reverse
    Acquisition valued at $2,236,360          4,969,691               5              (5)              --

  Issuance of ordinary shares                 4,517,706               5           2,045               --

  Issuance of shares in consideration
    of minority's shares in subsidiary        3,509,967               3           1,576               --

  Deferred stock-based compensation                  --              --             144             (144)

  Cancellation of deferred stock-based
    compensation                                     --              --            (130)             130

  Amortization of deferred stock-based                5               5
    compensation                                     --              --              --               --

  Foreign currency translation
    adjustments                                      --              --              --               --

  Net loss                                           --              --              --               --


  Comprehensive loss                                 --              --              --               --
                                          -------------   -------------   -------------    -------------

Balance as of December 31, 2005              55,606,331   $          56        $ 6, 797    $          (9)
                                          =============   =============   =============    =============
</TABLE>

<TABLE>
<CAPTION>
                                          ACCUMULATED
                                             OTHER                                               TOTAL
                                          COMPREHENSIVE     ACCUMULATED     COMPREHENSIVE    SHAREHOLDERS'
                                             INCOME           DEFICIT            LOSS           EQUITY
                                          -------------    -------------    -------------    -------------
<S>                                       <C>              <C>              <C>                      <C>
Balance as of January 1, 2005             $         (61)   $        (840)   $        (901)

  Reverse Acquisition adjustments                    --               --               --            3,210

  Shares issued to consultants for non-
    Cash consideration, during reverse
    Acquisition valued at $2,236,360                 --               --               --               --

  Issuance of ordinary shares                        --               --               --            2,050

  Issuance of shares in consideration
    of minority's shares in subsidiary               --               --               --            1,579

  Deferred stock-based compensation                  --               --               --               --

  Cancellation of deferred stock-based
    compensation                                     --               --               --               --

  Amortization of deferred stock-based
    compensation                                     --               --

  Foreign currency translation
    adjustments                                      77               --               77               77

  Net loss                                           --           (4,750)          (4,750)          (4,750)
                                                                            -------------

  Comprehensive loss                                 --               --    $      (4,673)              --
                                          -------------    -------------    -------------    -------------

Balance as of December 31, 2005           $          16    $      (5,590)                    $       1,270
                                          =============    =============                     =============
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.


                                      F-5
<PAGE>


                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH, INC.)
                            STATEMENTS OF CASH FLOWS
                           (U.S. DOLLARS IN THOUSANDS)


                                                         FOR THE YEAR ENDED
                                                            DECEMBER, 31
                                                      ------------------------
                                                         2005          2004
                                                      ----------    ----------
Cash flows from operating activities:
Net loss                                              $   (4,750)   $     (131)
Depreciation and amortization                              1,618            62
Accrued severance pay, net                                   337            16
Loss from sale of equipment                                    4            19
Impairment of long-lived assets                                6             6
Decrease in trade receivables                                 56            69
Decrease (increase) in other accounts
  receivable and prepaid expenses                            (56)          253
Decrease in inventories                                       35            --
Decrease (increase) in long term receivables                 (20)           --
Increase (decrease) in trade payables                        385          (424)
Decrease in other payables                                  (814)         (281)
Decrease in billings in excess of costs and
  estimated earnings onuncompleted contracts                  --          (456)
Decrease in long term loan payable                            (5)           --
                                                      ----------    ----------
Net cash used in operating activities                     (3,204)         (867)
                                                      ----------    ----------

Cash flows from investing activities:
Purchase of property and equipment                           (45)          (50)
Acquisition of a subsidiary in connection
  with reverse acquisition (Appendix A)                    1,738            --
Repayment of notes receivables                             2,741            --
Proceeds from sales of equipment                               7            46
Short-term bank deposits, net                                 78           324
                                                      ----------    ----------
Net cash provided by investing activities                  4,519           320
                                                      ----------    ----------

Cash flows from financing activities:
Repayment of short-term credit                                (5)          (16)
Long-term loan received                                       --            18
Repayment of long-term loans                                  --            37
Issuance of common stock                                   2,000            --
                                                      ----------    ----------
Net cash provided by (used in) financing activities        1,995            39
                                                      ----------    ----------

Effect of exchange rate changes on cash balance               (1)          (10)
                                                      ----------    ----------
Net change in cash and cash equivalents                    3,309          (518)
Cash and cash equivalents at the beginning
  of the period                                               18           536
                                                      ----------    ----------
Cash and cash equivalents at the end
  of the period                                       $    3,327    $       18
                                                      ==========    ==========

NON-CASH ACTIVITIES
Acquisition of intangible asset in connection
  with reverse acquisition                            $    1,579    $       --
                                                      ==========    ==========


                                      F-6
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH, INC.)
                        STATEMENTS OF CASH FLOWS (CONT.)
                           (U.S. DOLLARS IN THOUSANDS)


                                                        FOR THE YEAR ENDED
                                                           DECEMBER, 31
                                                       --------------------
                                                         2005        2004
                                                       --------    --------
Appendix A
Acquisition of a subsidiary in connection
  with reverse acquisition, net of cash acquired

Working capital- excluding cash                        $ (1,342)   $     --
Long term notes receivable                                 (130)         --
Issuance of shares in connection with
  reverse acquisition                                     3,210          --
                                                       --------    --------
                                                       $  1,738    $     --
                                                       ========    ========


               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                      F-7
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



NOTE 1 -   GENERAL

              A.     SecureLogic Corp. (formerly: Monterey Bay Tech, Inc.) ("the
                     Company" or SecureLogic" was incorporated in Nevada. The
                     Company and its subsidiaries ("the Group") have been
                     involved in Airport Baggage Handling Systems, as well as
                     Automated Materials Handling Systems. The Company is
                     selling Warehouse Management Systems ("WMS") using its
                     proprietary software for several years.

                     The Group also developed a system for airports - Integrated
                     Baggage Handling and Security ("IBHS"). This solution meets
                     new airport requirements by providing 100% baggage
                     screening at a rapid throughput rates and high detection
                     rates.
                     The Group is currently active in the development of
                     additional control systems, explosive detection systems and
                     nuclear-based explosive detection technologies in various
                     environments such as in lobby, checkpoints, cargo etc.

              B.     REVERSE ACQUISITION

                     On May 10, 2005, the Company amended its Articles of
                     Incorporation to change its name from Monterey Bay Tech,
                     Inc. to "SecureLogic Corp.".

                     On May 12, 2005, pursuant to the terms of a Stock Purchase
                     Agreement dated February 17, 2005 by and between the
                     Company, SpaceLogic, Ltd., an Israeli corporation
                     ("SpaceLogic") and the shareholders of SpaceLogic, the
                     Company acquired all of the issued and outstanding shares
                     of SpaceLogic, 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.
                     As the shareholders of SpaceLogic (as a group) received the
                     largest ownership interest in the Company, SpaceLogic was
                     determined to be the "accounting acquirer" in the reverse
                     acquisition. As a result, the historical financial
                     statements of the Company were replaced with the historical
                     financial statements of SpaceLogic.

                     On May 11, 2005, the Company issued 4,407,704 newly issued
                     shares of common stocks and four-year warrants to purchase
                     4,407,704 shares of the Company's common stock at a price
                     of $1.50 per share, to a total of nine accredited and/or
                     sophisticated investors who paid, in the aggregate, a total
                     of $2,000. In addition, the Company issued 3,305,780 shares
                     to consultants in connection with the reverse acquisition
                     in consideration of financial advisory services provided in
                     connection with the transaction and 1,663,933 shares paid
                     to an Israeli consultant representing 5% of the
                     consideration paid to the SpaceLogic stockholders as a
                     finder's fee.

                     On February 2005, SpaceLogic, obtained a secured bridge
                     loan of $500 from two investors, bearing interest at a rate
                     of 6% per annum and a commitment to issue 110,000 common
                     shares of the Company. Substantially all of SpaceLogic's
                     assets, including its intellectual property, secured the
                     bridge loan. The bridge loan and the interest were paid
                     back on May 12, 2005. In addition, on May 12, 2005 the
                     Company issued 110,000 newly issued shares of common stock
                     in accordance with the loan agreement to those two
                     investors.

                     On May 12, 2005, the Company also acquired the remaining
                     15% interest in SecureLogic, Ltd., an Israeli corporation
                     (a subsidiary of SpaceLogic), which was not already owned
                     by SpaceLogic, in exchange for an additional 3,509,967
                     newly issued shares of the Company's common shares. The
                     excess of the purchase price over the fair value of the net
                     tangible assets acquired, in the amount of $1,579 thousand,
                     has been allocated to technology asset and was to be
                     amortized over its estimated useful life, which was 3
                     years. Due to the adjustments of the revenues forecast, the
                     Company wrote-off in the fourth quarter of 2005, the entire
                     net book value of the asset.


                                      F-8
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES

              The consolidated financial statements have been prepared in
              accordance with generally accepted accounting principles in the
              United States ("U.S. GAAP").

              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 are re-measured into
              dollars in accordance with the principles set forth in Statement
              of Financial Accounting Standards ("SFAS") No. 52 "Foreign
              Currency Translation" ("SFAS No. 52"). All exchange gains and
              losses from re-measurement of monetary balance sheet items
              resulting from transactions in non-dollar currencies are recorded
              in the statement of operations as they arise. The functional
              currency of the Israeli Subsidiaries is the New Israeli Shekel
              ("NIS"). Their financial Statements are translated into dollars in
              accordance with the principles set forth in SFAS No. 52.The
              translation of assets and liabilities is at year-end exchange
              rates; results of operations have been translated at average
              exchange rates. The translation adjustments are included in
              accumulated other comprehensive income in shareholders' equity.

              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.

              CONCENTRATION OF CREDIT RISKS

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

              The Group maintains cash and cash equivalents and investments with
              major financial institutions and limits the amount of credit
              exposure with any institution.

The Group performs ongoing credit evaluations of its customers and to date, has
not experienced any unexpected material losses. An allowance for doubtful
accounts is determined with respect to specific accounts receivable that the
management evaluates to be uncollectible.


                                      F-9
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

                             PROPERTY AND EQUIPMENT

              Equipment is stated at cost, net of accumulated depreciation.

              Depreciation is calculated by the straight-line method over the
              estimated useful lives of the assets at the following annual
              rates:

                                                                      YEARS
                                                                    ---------
              Motor vehicles                                            7
              Office furniture and equipment (including computers)     3-17


              The Company's long-lived assets are reviewed for impairment in
              accordance with SFAS No. 144 "Accounting for the Impairment or
              Disposal of Long-Lived Assets" whenever events or changes in
              circumstances indicate that the carrying amount of an asset may
              not be recoverable. Recoverability of assets to be held and used
              is measured by a comparison of the carrying amount of an asset to
              the future undiscounted cash flows expected to be generated by the
              asset. If an asset is determined to be impaired, the impairment to
              be recognized is measured by the amount by which the carrying
              amount of the asset exceeds its fair value. As of December 31,
              2005, impairment losses of $12 have been identified.

              DEFERRED TAXES

              The Company and its subsidiary account for income taxes in
              accordance with Statement of Financial Accounting Standards No.
              109, "Accounting for Income Taxes" ("SFAS No.109"). This Statement
              prescribes the use of the liability method whereby deferred tax
              assets and liability account balances are determined based on
              differences between financial reporting and tax bases of assets
              and liabilities and are measured using the enacted tax rates and
              laws that will be in effect when the differences are expected to
              reverse. The Company and its subsidiary provide a valuation
              allowance, if necessary, to reduce deferred tax assets to their
              estimated realizable value.

              SEVERANCE PAY

              The liabilities of the Group for severance pay are calculated
              based on the most recent salary of the emplo yees as of the
              balance sheet date in accordance with Israeli Severance Pay Law.

              The Company's obligation for severance pay is provided by monthly
              deposits with insurance companies ("Severance pay funds").
              Severance pay funds presented in the balance sheet include profits
              accumulated to balance sheet date. The amounts deposited may only
              be withdrawn after fulfillment of the obligations pursuant to
              Israeli Severance Pay Law or labor agreements. The value of the
              deposited funds is based on the cash surrender value of these
              funds and includes immaterial profits.

              Severance pay expenses for the years ended December 31, 2005 and
              2004 amounted to approximately $144 and $59 respectively.


                                      F-10
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES (CONT.)


              STOCK-BASED COMPENSATION

              The Company has elected to follow Accounting Principles Board
              Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
              No. 25") and FASB Interpretation No. 44, "Accounting for Certain
              Transactions Involving Stock Compensation" ("FIN No. 44") in
              accounting for its employee stock option plans. Under APB No. 25,
              when the exercise price of the Company's stock options is less
              than the market price of the underlying shares on the date of
              grant, compensation expense is recognized.

              Under Statement of Financial Accounting Standard No. 123,
              "Accounting for Stock Based Compensation" ("SFAS No. 123"), pro
              forma information regarding net loss and loss per share is
              required, and has been determined as if the Company had accounted
              for its employee stock options under the fair value method of that
              statement. The fair value for these options was estimated at the
              date of grant using a Black-Scholes Option Valuation model with
              the following weighted-average assumptions for year ended December
              31, 2005: weighted-risk-free interest rate of 3.99%, with dividend
              yields of 0%, volatility factors of the expected market price of
              the Company's Common Stock of 116%, and a weighted-average
              expected life of the options of 3 years. During the year ended
              December 31, 2004 the Company did not issue any options. Stock
              compensation, for pro forma purposes, is amortized over the
              vesting period.

              The following table illustrates the effect on net loss and loss
              per share as if the fair value method had been applied to all
              outstanding and unvested awards in each period:

                                                             FOR THE YEAR ENDED
                                                                DECEMBER 31,
                                                               2005      2004
                                                             -------    -------
         Net loss, as reported                               $(4,750)   $  (131)

         Stock-based compensation determined
         Under APB 25                                              5         --

         Total stock-based compensation
           expense determined under fair value
           method for all awards                                (427)        --
                                                             -------    -------

         Pro forma net loss                                  $(5,172)   $  (131)
                                                             =======    =======

         Basic and diluted net loss per share, as reported    (0.120)   (0. 012)

         Basic and diluted net loss per share, pro forma      (0.131)   (0. 012)


                                      F-11
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

              REVENUE RECOGNITION

              The Company generated revenues from a long-term contract of
              construction of the baggage handling system in Ben Gurion Airport
              ("BGA 2000") and from sale of its self developed software relating
              to Warehouse Management Systems. The Company also generated
              revenues from providing maintenance services and support, from
              sale of spare parts and from commissions on supplying spare parts.

              1. Revenue from BGA 2000 Baggage Handling System ("BHS")

                     Revenue from the BGA 2000 BHS long-term construction
                     contract is recognized based on Statement of Position 81-1
                     "Accounting for Performance of Construction-Type and
                     Certain Production - Type Contracts" ("SOP 81-1") whereby
                     revenue is recognized according to the percentage of
                     completion method.

                     Sales and anticipated profit under the long-term contract
                     are recorded using the cost-to-cost method of accounting,
                     where by percentage of completion is measured based on the
                     ratio of costs incurred, to estimated total project costs.
                     This percentage approximates the engineering percentage of
                     completion.

                     Estimated gross profit from long-term contracts may change
                     due to changes in estimates resulting from differences
                     between actual performance and original forecasts. Such
                     changes in estimated gross profit are recorded in results
                     of operations when they are reasonably determinable by
                     management, on a cumulative catch-up basis.

                     Amounts representing contract change orders, claims or
                     other items are included in sales only when they can be
                     reliably estimated and realization is probable.

                     The Company believes that the use of the percentage of
                     completion method is appropriate as the Company has the
                     ability to make reasonably dependable estimates of the
                     extent of progress towards completion, of contract revenues
                     and of contract costs. In addition, the contract executed
                     includes provisions that clearly specify the enforceable
                     rights regarding services to be provided and received by
                     the parties to the contracts, the consideration to be
                     exchanged and the manner and terms of settlement. The
                     Company expects to perform its contractual obligations and
                     its customer is expected to satisfy its obligations under
                     the contract.

              2. Revenues from sale of software and products

                     Revenues from sale of software are recognized in accordance
                     with Statement of Position 97-2, "Software Revenue
                     Recognition", as amended ("SOP 97-2"). SOP 97-2 generally
                     requires revenue earned on software arrangements involving
                     multiple elements to be allocated to each element based on
                     the relative fair value of the elements. However, the
                     Company has adopted Statement of Position 98-9,
                     "Modification of SOP 97-2, Software Revenue Recognition
                     with Respect to Certain Transactions", ("SOP 98-9"). SOP
                     98-9 requires that revenue be recognized under the
                     "residual method" when Vendor Specific Objective Evidence
                     ("VSOE") of fair value exists for all undelivered elements
                     and VSOE does not exist for all of the delivered elements.
                     Under the residual method any discount in the arrangement
                     is allocated to the delivered elements.


                                      F-12
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

              REVENUE RECOGNITION (CONT.)

              2. Revenues from sale of software and products (cont.)

                     Revenues from sale of software license are recognized when
                     delivery of the product has occurred, the fee is fixed or
                     determinable, collectibility is probable, vendor specific
                     objective evidence exists to allocate total fees to
                     elements of the arrangement and persuasive evidence of an
                     arrangement exists.

                     The Company also generated revenues from products sales
                     which are recognized in accordance with Staff Accounting
                     Bulletin No. 104 "Revenue Recognition" when delivery has
                     occurred and, where applicable, after installation has
                     occurred, there is persuasive evidence of an agreement, the
                     fee is fixed or determinable and collection of the related
                     receivable is probable and no further obligations exist. In
                     cases where delivery has occurred but the required
                     installation has not been performed, the Company does not
                     recognize the revenue until the installation is completed.

              3. Revenues from maintenance services and support

                     Revenues from maintenance services and support are
                     recognized on a straight-line basis over the term of the
                     maintenance services and support agreement.

              4. Revenues from sale of spare parts

                     Revenues from sale of spare parts are recognized when
                     delivery of the spare parts has occurred, the fee is fixed
                     or determinable, collectibility is probable and persuasive
                     evidence of an arrangement exists.

              5. Revenues from commissions

                     Revenue from commissions on supplying spare parts is earned
                     when the sale is consummated.

              6. Deferred revenue

                     Deferred revenue includes unearned amounts received under
                     maintenance services and support contracts.

              PROVISION FOR WARRANTIES

              The Company estimates the costs that may be incurred under its
              basic warranty and records a liability in the amount of such costs
              at the time revenue is recognized. The specific terms and
              conditions of those warranties vary depending upon the product
              sold and the work preformed. Factors that affect the Company's
              warranty liability include the anticipated work, weighted average
              cost of employees, engineering estimates and anticipated rates of
              warranty claims. The Company's management periodically assesses
              the adequacy of its recorded warranty liability based on the past
              experience of management and adjusts the amount as necessary.


                                      F-13
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

              PROVISION FOR WARRANTIES (CONT.)

                     Changes in the Company's provision for warranty during the
                     year are as follows:


                     Balance, at January 1, 2005                      $     236
                     Warranties issued during the year                       11
                     Warranties expired or settled during the year         (127)
                                                                      ---------
                     Balance, at December 31, 2005                    $     121
                                                                      =========

              RESEARCH AND DEVELOPMENT COSTS

              Research and development costs, net of participations, are charged
              to the statement of operations as incurred. SFAS NO. 86
              "Accounting for the Costs of Computer Software to be Sold, Leased
              or Otherwise Marketed," requires capitalization of certain
              software development costs subsequent to the establishment of
              technological feasibility. Based on the product development
              process, technological feasibility is established upon completion
              of a working model. Costs, incurred by the Company between
              completion of the working models and the point at which the
              products are ready for general release, have been insignificant.
              Therefore, research and development costs have been charged to the
              statement of operations, as incurred.

              PARTICIPATION IN RESEARCH AND DEVELOPMENT COSTS

              Participation of the BIRD Foundation in funding approved research
              and development projects is recognized at the time the Company is
              entitled to such participation, on the basis of the costs
              incurred. Such participation is included as a deduction of
              research and development costs.

              FAIR VALUE OF FINANCIAL INSTRUMENTS

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

              BASIC AND DILUTED NET LOSS PER SHARE

              Basic and diluted net Loss per share are presented in conformity
              with SFAS No. 128 "Earnings per Share" for all years presented.
              Basic and diluted net loss per share have 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. The total number of shares excluded
              from the calculations of diluted net loss per share were 6,532,903
              and 0 for the years ended December 31, 2005 and 2004 respectively.

              RECLASSIFICATION

              Certain figures from prior year have been reclassified in order to
              conform to the 2005 presentation.


                                      F-14
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 2 --  SIGNIFICANT ACCOUNTING POLICIES (CONT.)

              RECENT ACCOUNTING PRONOUNCEMENTS

              In December 2004, the Financial Accounting Standards Board (FASB)
              issued SFAS No. 123(R). SFAS No. 123(R) requires employee
              share-based equity awards to be accounted for under the fair value
              method, and eliminates the ability to account for these
              instruments under the intrinsic value method prescribed by APB
              Opinion No. 25 and allowed under the original provisions of SFAS
              No. 123. SFAS No. 123(R) requires the use of an option pricing
              model for estimating fair value, which is then amortized to
              expense over the service periods. Had the Company adopted SFAS
              123(R) in prior periods, the impact of that standard would have
              approximated the impact of SFAS 123 as described in the disclosure
              of pro forma net income and income per share above. SFAS No.
              123(R) allows for either prospective recognition of compensation
              expense or retrospective recognition. In the first quarter of
              2006, the company began to apply the prospective recognition
              method and implemented the provisions of SFAS No. 123(R). In
              January 2005, the SEC issued SAB No. 107, which provides
              supplemental implementation guidance for SFAS No. 123(R). SFAS No.
              123(R) will be effective for the Company beginning in the first
              quarter of fiscal 2006.


              In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
              Error Corrections." SFAS No. 154 replaces APB Opinion No. 20.
              "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes
              in Interim Financial Statements." SFAS No. 154 requires
              retrospective application to prior periods' financial statements
              of changes in accounting principle, unless it is impracticable to
              determine either the period-specific effects or the cumulative
              effect of the change. The Company does not expect the adoption of
              SFAS No. 154 will have a material impact on its consolidated
              financial statements.


              In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1,
              "The Meaning of Other-Than-Temporary Impairment and Its
              Application to Certain Investments" ("FSP 115-1 and 124-1"), which
              clarifies when an investment is considered impaired, whether the
              impairment is other than temporary, and the measurement of an
              impairment loss. It also includes accounting considerations
              subsequent to the recognition of an other-than-temporary
              impairment and requires certain disclosures about unrealized
              losses that have not been recognized as other-than-temporary
              impairments. FSP 115-1 and 124-1 are effective for all reporting
              periods beginning after December 15, 2005. At December 31, 2005,
              the Company had no unrealized investment losses that had not been
              recognized as other-than-temporary impairments in its
              available-for-sale securities. The Company does not anticipate
              that the implementation of this pronouncement will have a
              significant impact on its financial position or results of
              operations.


                                      F-15
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 3     -  CASH AND CASH EQUIVALENTS

                                                          DECEMBER 31,
                                                              2005
                                                          ------------
              Cash                                        $        505
              Deposits in USD                                    2,780
              Deposits in NIS                                       42
                                                          ------------
                                                          $      3,327
                                                          ============


NOTE 4     -  SHORT-TERM BANK DEPOSITS

                                    ANNUAL INTEREST RATE
                                           AS OF
                                        DECEMBER 31,       DECEMBER 31,
                                            2005               2005
                                    --------------------   ------------
                                            %
              Deposits in NIS (1)                  4.55    $         66
              Deposits in foreign
                currencies In USD                  2.75              67
                                                           ------------

                                                           $        133
                                                           ============


              (1)   The deposits include a balance in the amount of $66 that
                    serves as collateral for a bank guarantee issued in favor of
                    a related company. In addition, a balance of $37 serves as
                    collateral for bank guarantees issued to secure advances
                    received from customers (see Note 11a).

NOTE 5-       OTHER ACCOUNTS RECEIVABLE

                                                          DECEMBER 31,
                                                              2005
                                                          ------------

              Related companies (1)                       $         28
              Grant receivable from the Bird
                Foundation (2)                                      91
              Government authorities                                32
              Other receivables                                     10
                                                          ------------
                                                          $        161
                                                          ============


              (1) Non-interest bearing.
              (2) See Note 11.


                                      F-16
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 6     -  NOTES RECEIVABLES

              In June 2004, the Company settled its lawsuit with Aladdin
              Knowledge Systems, Inc. ("AKS") which had alleged among other
              things, that the Company's use of the "Aladdin" trademark
              infringed the rights of AKS. In settlement of the action, the
              Company agreed to change its name so as to cease using the
              "Aladdin" mark in exchange for a total payment of $550 which
              represented reimbursement of legal fees and certain costs incurred
              by the Company associated with implementing a name change and
              certain costs to be incurred by IMSI for the cost of implementing
              a change of the name of the Company's former Aladdin Systems
              subsidiary. In 2004, the Company received $420 from AKS and the
              balance of $130 is due to the Company in May 2007.

NOTE 7     -  PROPERTY AND EQUIPMENT, NET

              A. COMPOSITION
                                                          DECEMBER 31,
                                                              2005
                                                          -----------
                 Cost
                 Motor vehicles                           $       145
                 Office furniture and equipment                   330
                                                          -----------
                                                                  475

                 Accumulated depreciation                         258
                 ------------------------                 -----------
                 Equipment, net                           $       217
                                                          ===========


              B.  Depreciation expense for the years ended December 31, 2005 and
                  2004 amounted to $39 and $62 respectively. In addition, the
                  Company recognized in 2005 and in 2004 an impairment loss of
                  $6 and $6, respectively.


                                      F-17
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


NOTE 8-    OTHER ACCOUNTS PAYABLE

                                                          DECEMBER 31,
                                                              2005
                                                          -----------

              Payroll and related expenses                $       129
              Provision for employees vacation leave              173
              Government authorities                              104
              Provision for warranty                              121
              Deferred revenue                                      6
              Other payables (1)                                  427
                                                          -----------
                                                          $       960
                                                          ===========


              (1)    On July 10, 2002, a financial lawsuit in the United States
                     for $ 50 million was filed by the SpaceLogic against a
                     partner in a joint venture ("the partner") for breach of
                     commitments based on a collaboration agreement. The partner
                     filed a counter claim for the reimbursement of $ 418 which
                     was invested in the Joint Venture and deposited in the
                     SpaceLogic's bank account. The Company recorded the amount
                     invested as a liability in the financial statements.

                     Management believes, based on its legal advisors, that the
                     chances the Company will be required to reimburse the
                     partner are remote.


NOTE 9     -  LONG-TERM LOANS

              a. COMPOSITION:

                               ANNUAL INTEREST RATE
                                      AS OF
                                   DECEMBER 31,        YEARS OF    DECEMBER 31,
                                      2005             MATURITY        2005
                               --------------------    ---------   ------------

From leasing companies                          8.3%   2005-2009   $         12
Less - current maturities                       8.3%                         (5)
                                                                   ------------

                                                                   $          7
                                                                   ============

                     The maturities of these loans after December 31, 2005 are
                     as follows:


                     2006 - current maturities                      $   5
                     2007                                               4
                     2008                                               2
                     2009                                               1
                                                                    -----
                                                                    $  12
                                                                    =====

              b. With respect to collateral, see Note 11b.


                                      F-18
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 10    -TAXES ON INCOME

              a. APPLICABLE TAX LAWS:

                     The provisions of the Income Tax (Inflationary Adjustments)
                     Law, 1985 apply to the Israeli subsidiaries of the Company.
                     According to the law, the results for tax purposes are
                     measured based on the changes in the Israeli CPI.

              b. TAX LOSSES CARRYFORWARD:

                     As of December 31, 2005, the Company has tax losses of
                     approximately $2,300 that may be carried forward for an
                     indefinite period.

              c. FINAL TAX ASSESSMENTS:

                     The Company's and its U.S. subsidiary tax filings are open
                     to examination by the Internal Revenue Service and
                     California Franchise Tax Board for 3 and 4 years,
                     respectively SpaceLogic has tax assessments, which are
                     considered final through 2000. Other subsidiaries have no
                     final tax assessments since inception.

              d. DEFERRED TAXES:

                     Deferred income taxes reflect the net tax effect of
                     temporary differences between the carrying amounts of
                     assets and liabilities for financial reporting purposes and
                     the amounts used for income tax purposes. The deferred
                     taxes computed at the enacted tax rate that is expected to
                     be in effect at the time the differences are expected to
                     reverse. Significant components of the Group's deferred tax
                     assets are as follows:


                                      F-19
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 10    -TAXES ON INCOME (CONT.)

              d. DEFERRED TAXES: (Cont.)

                 DEFERRED TAX ASSETS:

                                                               DECEMBER 31,
                                                                   2005
                                                               ------------
                   Short-term deferred tax assets-net:

                   State taxes                                 $        104
                   Provision for employees vacation leave               118
                                                               ------------
                                                                        118
                   Valuation allowance                                 (118)
                                                               ------------
                                                               $        104
                                                               ------------
                   Long-term deferred tax assets-net:

                   Accrued severance pay and others            $        314
                   Carryforward tax losses of the company                78
                   Carryforward tax losses of the subsidiary          2,800
                                                               ------------
                                                                      3,114
                   Valuation allowance                               (3,114)
                                                               ------------
                                                               $         --
                                                               ============


              e. INCOME TAX EXPENSES

                 Income tax expense consists of:

                                              FOR THE YEAR ENDED
                                                 DECEMBER, 31
                                             -------------------
                                               2005       2004
                                             --------   --------

                 Current U.S.                $  1,487   $     --
                 Current non-U.S                   17         37
                                             --------   --------
                                             $  1,504   $     37
                                             --------   --------

                 Deferred U.S.               $ (1,484)  $     --
                                             --------   --------

                                             $     20   $     37
                                             ========   ========


                                      F-20
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 10    -TAXES ON INCOME (CONT.)

              e. INCOME TAX EXPENSES

                 The effective tax rate as a percentage of income before income
                 taxes differs from the statutory income tax rate (when applied
                 to income before income taxes) as follows:

                                                 FOR THE YEAR ENDED
                                                    DECEMBER, 31
                                               ---------------------
                                                 2005         2004
                                               --------     --------
         Statutory federal income tax rate          (34%)        (35%)
         Increase (decrease) resulting from:
           Expenses not deductible for taxes      16.86%       17.04%
           Current expenses                        4.28%          --
           Deferred expenses                      (0.74%)         --
           Increase in valuation allowance        14.02%       57.32%
                                               --------     --------
           Effective tax (benefit) rate            0.43%       39.36%
                                               --------     --------

                        On July 25, 2005 an amendment to the Israeli Tax Law was
                        approved by the Israeli Parliament, which reduces the
                        tax rates imposed on Israeli companies to 31% for 2006.
                        This amendment states that the corporate tax rate will
                        be further reduced in subsequent tax years as follows:
                        in 2007 29%, in 2008 27%, in 2009 26% and thereafter
                        25%. This change does not have a material effect on the
                        Company's financial statements.

NOTE 11-   GUARANTEES, CHARGES, AND CONTINGENCIES AND COMMITTMENTS

              a. GUARANTEES:

                     The Company has provided bank guarantees at the amount of
                     $37 in order to secure advances received from customers
                     and $17 to secure rental fees.

                     The Company has also deposited an amount of $66 as
                     collateral for a bank guarantee issued in favor of a
                     related company.

              b. CHARGES:

                     As collateral for a loan granted by a leasing company, a
                     fixed charge has been placed on motor vehicles.

                     For deposits serving as collateral for bank guarantees, see
                     Note 4.

               c. COMMITMENTS

                     The future minimum lease commitments of the Company under
                     various non-cancelable operating lease agreements in
                     respect of motor vehicles are as of December 31, 2005 as
                     follows:


                              2006                                    17
                              2007                                    16
                              2008                                     1
                                                                    ======
                                                                      34
                                                                    ======


                                      F-21
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 11-   GUARANTEES, CHARGES, AND CONTINGENCIES AND COMMITMENTS

              c. COMMITMENTS (Cont.)


                     The Company is committed to pay rent for a building until
                     July 2007. Future rental fees on account of the lease as
                     of December 31, 2005 aggregate to approximately $50 per
                     annum. The Company received an option to extend the lease
                     for two additional years. As for collateral, see above.
                     Rent expenses for the years ended December 31, 2005 and
                     2004 amounted to $50 per each year.

                     In June 2004, an Agreement was signed between the Company
                     and the Bird Foundation ("BIRD") for BIRD's participation
                     in the Company's expected research and development budget
                     of approximately $1,072 up to a participation amount of
                     $534. This research and development was to be performed
                     within 18 months from the approval date. In March 2006,
                     the Company received an approval from BIRD to extend the
                     project's time framework by an additional six months. The
                     participation recorded in 2005 and 2004 amounted to $184
                     and $151, respectively.

                     Pursuant to the agreement, the Company is required to pay
                     royalties at the rate of 5% of sales of product developed
                     with funds provided by the BIRD Foundation, up to an
                     amount equal to 100%-150% of BIRD Foundation's research
                     and development grants (dollar-linked) related to such
                     projects. The obligation to pay these royalties is
                     contingent on actual sales of the products and in the
                     absence of such sales no payment is required. As of
                     December 31, 2005 the Company's' contingent obligation to
                     BIRD in respect of the aforementioned participation
                     amounted to $ 334.


NOTE 12-      SHAREHOLDERS' DEFICIENCY

                     EMPLOYEE, DIRECTORS, AND CONSULTANT OPTION PLANS

                     In 1999, the Company adopted a stock option plan ("1999
                     Stock Option Plan"), which allows for the issuance of
                     incentive stock options and non-qualified stock options to
                     purchase shares of the Company's common stock. The option
                     plan has authorized 3,000,000 shares of which 1,142,247
                     remain available for granting at December 31, 2005. Under
                     the option plan, incentive stock options may be granted to
                     employees, directors, and officers of the Company and
                     non-qualified stock options may be granted to consultants,
                     employees, directors, and officers of the Company. Options
                     granted under the option plan are for periods not to
                     exceed ten years, and must be issued at prices not less
                     than 100% of the fair market value of the stock on the
                     date of grant. Options granted to shareholders who own
                     greater than 10% of the outstanding stock are for periods
                     not to exceed five years and must be issued at prices not
                     less than 110% of the fair market value of the stock on
                     the date of grant. Options granted under the option plan
                     generally vest within 4 years. During the year ended
                     December 31, 2005 the Company did not grant options under
                     the 1999 Stock Option Plan. During the year ended December
                     31, 2004, the Company granted 1,182,354 options to
                     employees, officers and directors with exercise prices
                     ranging from $0.40 to $0.62 per share and immediate
                     vesting. The exercise price of each option grant was
                     estimated using the value of the closing price of the
                     Company's common stock on the date of the grant.


                                      F-22
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 12-      SHAREHOLDERS' DEFICIANCY (CONT.)


              EMPLOYEE, DIRECTORS, AND CONSULTANT OPTION PLANS (CONT.)


              In 2005, the Company adopted a new stock option plan ("2005 Stock
              Option/Stock Issuance Plan"), the option plan authorized
              3,000,000 shares of which 1,734,750 remained available for
              granting at December 31, 2005. Under the option plan: incentive
              stock options may be granted to employees, directors, and
              officers of the Company and non-qualified stock options may be
              granted to consultants, employees, directors, and officers of the
              Company. Options granted under the option plan are for periods
              not to exceed ten years, and must be issued at prices not less
              than 100% of the fair market value of the stock on the date of
              grant. Options granted to shareholders who own greater than 10%
              of the outstanding stock are for periods not to exceed five years
              and must be issued at prices not less than 110% of the fair
              market value of the stock on the date of grant. Options granted
              under the option plan generally vest within 4 years. During 2005
              the company granted. Under these plan, 1,265,250 options at an
              average exercise price of $1.31.


              A summary of the status of the Company's stock option plans as of
              December 31, 2005 and 2004 and changes during the years then
              ended are as follows:


<TABLE>
<CAPTION>
                                                              WEIGHTED-     WEIGHTED-
                                  OPTIONS                      AVERAGE       AVERAGE
                                AND SHARES                     EXERCISE        FAIR
                                 AVAILABLE     OUTSTANDING    PRICE PER      VALUE OF
                                 FOR GRANT     OPTIONS (*)       SHARE        OPTION
                                -----------    -----------    -----------   -----------
<S>                                 <C>          <C>          <C>           <C>
Outstanding December 31, 2003       167,969      2,832,031    $      1.22
Granted                          (1,282,354)     1,282,354    $      0.60   $      0.39
Forfeited                         2,256,632     (2,256,632)   $      1.27
                                -----------    -----------    -----------
Outstanding December 31, 2004     1,142,247      1,857,753    $      0.74
New Plan                          3,000,000             --             --
Granted                          (1,265,250)     1,265,250    $      1.31   $      0.82
                                -----------    -----------    -----------
Outstanding December 31, 2005     2,876,997      3,123,003    $      0.97
                                -----------    -----------    -----------
</TABLE>


                     The following table summarizes information about options
                     outstanding and exercisable as of December 31, 2005:

<TABLE>
<CAPTION>
                                       OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                                          WEIGHTED-
                                           AVERAGE     WEIGHTED-                       WEIGHTED-
   RANGE OF                NUMBER         REMAINING     AVERAGE         NUMBER         AVERAGE
 EXERCISE PRICE        OUTSTANDING AT    CONTRACTUAL   EXERCISE     OUTSTANDING AT     EXERCISE
       $             DECEMBER 31, 2005      LIFE        PRICE      DECEMBER 31, 2005     PRICE
---------------      -----------------   -----------   ---------   -----------------   ---------
<S>                            <C>              <C>    <C>                   <C>       <C>
0.23 - 0.44                    341,000          0.36   $    5.79             341,000   $    0.36
0.60 - 0.75                  1,315,054          0.63   $    4.96           1,315,054   $    0.63
1.07 - 1.54                  1,344,849          1.31   $    6.75              79,599   $    1.26
1.74 - 4.00                    122,100          2.67   $    2.39             122,100   $    2.67
                     -----------------                             -----------------
                             3,123,003                                     1,857,753
</TABLE>

                                      F-23
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 13- SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF OPERATIONS

                                                   FOR THE YEAR ENDED
                                                      DECEMBER, 31
                                                   ------------------
                                                    2005        2004
                                                   -------    -------
          Research and development costs, net
          Research and development costs           $ 1,326        636
          Amortization of Intangible Asset           1,579         --
          Participation from BIRD                     (184)      (151)
                                                   -------    -------
                                                   $ 2,721        485
                                                   =======    =======


NOTE 14  -        INFORMATION ON OPERATING SEGMENTS

              a. The Group operates in the three following reportable operating
                 segments:

                 o  Baggage Handling Systems- the Company was involved in the
                    construction of the automatic -baggage-handling system for
                    Ben-Gurion Airport. In addition, in 2004 the Company sold
                    spare parts relating to the system constructed and also
                    received commissions in respect of the aforementioned sales.

                 o  WMS and Software - development, planning, implementation and
                    marketing of software for warehouses and distribution
                    centers.

                 o  Maintenance services and support.

              b.  Measurement of revenues and segment profits and losses:

                  The measurement of revenues, profits or losses and assets of
                  the reportable operating segments is based on the same
                  accounting principles applied in these financial statements.

                  Segment profits (losses) reflect the income from operations of
                  the segment and do not include net financial income or expense
                  and income tax expenses (tax benefit) since those items are
                  not included in the measurement of segment profit or loss.


                                      F-24
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 14:-     INFORMATION ON OPERATING SEGMENTS ( CONT.)

              c. Financial data relating to reportable operating segments:


<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31, 2005
                                    BAGGAGE                MAINTENANCE
                                   HANDLING     WMS AND   SERVICES AND
                                    SYSTEMS    SOFTWARE     SUPPORT      ADJUSTMENTS       TOTALS
                                   --------    --------   ------------   -----------      --------
<S>                                     <C>         <C>            <C>            <C>          <C>
Revenues from external customers        423         199            185            --           807
                                   ========    ========   ============                    ========
Segment profit (loss)                (3,262)       (334)            25        (1,179)(1)    (4,750)
                                   ========    ========   ============   ===========      ========
Depreciation expense                     19          10              5             5            39
                                   ========    ========   ============   ===========      ========
Investments in long-lived assets         30           5              5             5            45
                                   ========    ========   ============   ===========      ========

                                                       DECEMBER 31, 2005
                                   ---------------------------------------------------------------
Segment assets                        3,489         150            125            --(2)      4,239
                                   ========    ========    ===========   ===========      ========
</TABLE>

(1) Unallocated expenses
(2) Unallocated assets


                                      F-25
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 14:-     INFORMATION ON OPERATING SEGMENTS ( CONT.)

              c. Financial data relating to reportable operating segments:
(cont.)

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31, 2004
                                                            MAINTENANCE
                                       BAGGAGE                  AND
                                      HANDLING    WMS AND    SERVICES
                                       SYSTEMS   SOFTWARE     SUPPORT      OTHER     ADJUSTMENTS       TOTALS
                                      --------   --------   -----------   --------   -----------      --------
   <S>                                   <C>          <C>           <C>         <C>           <C>        <C>
   Revenues from external customers      2,492        776           222         20            --         3,510
                                      ========   ========   ===========   ========                    ========
   Segment profit (loss)                   366         44           112         20          (626)(1)       (84)
                                      ========   ========   ===========   ========   ===========      ========
   Depreciation expense                     29         10             5         14                          58
                                      ========   ========   ===========   ========   ===========      ========
   Investments in long-lived assets         14         25             8          3                          50
                                      ========   ========   ===========   ========   ===========      ========

                                                                   DECEMBER 31, 2004

   Segment assets                          234        131           122          4           444(2)        935
                                      ========   ========   ===========   ========   ===========      ========
</TABLE>


(1) Unallocated expenses
(2) Unallocated assets

              d. Revenues from single customer that exceed 10% of total revenues
                 in the reported years:


                                            YEAR ENDED DECEMBER 31,
                                            -----------------------
                                             2005             2004
                                             ----             ----
     Customer A                               35%              68%


                                      F-26
<PAGE>

                                SECURELOGIC CORP.
                       (FORMERLY: MONTEREY BAY TECH. INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 15:-     TRANSACTIONS AND BALANCES WITH RELATED PARTIES


                                                        FOR THE YEAR ENDED
                                                           DECEMBER, 31
                                                       --------------------
                                                         2005        2004
                                                       --------    --------
   A. Expenses:
        Salary and related expenses to the Company's
          CEO                                               283         109
        Consulting and management fees to a related
          company                                           130         495
        Participation in general expenses in the
          ordinary course of business                       (28)        (45)
                                                       --------    --------
                                                            385         559
                                                       ========    ========



                                                    FOR THE YEAR
                                                        ENDED
                                                    DECEMBER, 31
                                                        2005
                                                    ------------
              B. Balances with related parties:

                   Other accounts receivable                  28
                   Long-term receivable and loan              --
                   Other accounts payable                     29
                                                    ------------



              C. For deposits serving as collateral for a bank guarantee
                 issued in favor of a related company - See Note 4(1).


                                      F-27
<PAGE>

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

Effective July 15, 2005, the Board of Directors of the Company approved the
engagement of Brightman Almagor & Co., a member firm of Deloitte Touche Tohmatsu
as its new independent auditors for the fiscal year ended December 31, 2005. The
Company did not consult with Brightman Almagor & Co., a member firm of Deloitte
Touche Tohmatsu on any matters prior to their retention regarding the
application of accounting principles to a specific completed or contemplated
transaction, or the type of audit opinion that might be rendered on the
Company's financial statements.

Stonefield Josephson audited the Company's financial statements for fiscal year
ended December 31, 2004. Stonefield Josephson's report on our financial
statements for the year ended December 31, 2004 did not contain an adverse
opinion or a disclaimer of opinion nor was it qualified or modified as to
uncertainty, audit scope or accounting principle. Since January 31, 2005, the
date that Stonefield Josephson was engaged as the Company's independent
auditors, which was the subject of the Company's Current Report filed on Form
8-K on February 4, 2005 and through July 15, 2005, the date of cessation of
Stonefield Josephson as the Company's independent auditor, there were no
disagreements with Stonefield Josephson on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of Stonefield Josephson
would have caused them to make reference thereto in their report on the
financial statements for such years.

ITEM 8A.  CONTROLS AND PROCEDURES

Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information required to be disclosed
by the Company in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commission's
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files under the Exchange Act is
accumulated and communicated to the Company's management, including its Chief
Executive Officer, as appropriate to allow timely decisions regarding required
disclosure.

Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), within 90 days of the filing date of this report ,
and, based on their evaluation, the Company's Chief Executive Officer has
concluded that these controls and procedures are effective. There were no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.


                                       19
<PAGE>


LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROL

Management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material errors. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations on all internal control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. The design of any
system of internal control is also based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in
circumstances, and/or the degree of compliance with the policies and procedures
may deteriorate. Because of the inherent limitations in a cost effective
internal control system, financial reporting misstatements due to error or fraud
may occur and not be detected on a timely basis.

There have been no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the evaluation referenced in the above paragraph.

ITEM 8B.  OTHER INFORMATION

None

PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
         REGISTRANT

The following table sets forth the names and positions of our directors and
executive officers:

Name                            Age     Position
----                            ---     --------

Gary Koren                      56      Chairman, Chief Executive Officer,
                                          President and Director
Shalom Dolev                    49      Director
Tomer Nahum                     34      Chief Financial Officer
Cathal Flynn (1)                67      Director
Sean Deson (1)(2)(3)            42      Director
Paul Goodman (2)                44      Director
Iftach Yeffet                   48      Chief Operating Officer


                                       20
<PAGE>

(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Sean Deson, a member of our audit committee, serves as the audit committee's
financial expert as that term is defined in Section 407 of the Sarbanes-Oxley
Act.

The following sets forth biographical information concerning our directors and
executive officers for at least the past five years:

GARY KOREN - Mr. Koren is the founder of our SpaceLogic subsidiary and an
experienced entrepreneur in the high-tech industry. He has been the Chief
Executive Officer of SpaceLogic since its inception in 1998 and has over 25
years of professional experience in systems engineering. In 1982, Mr. Koren
founded Logistica Systems Ltd., serving as Chief Executive Officer for over 15
years. Mr. Koren holds a BSc. in Industrial and Management Engineering from the
Technion, the Israel Institute of Technology.

SHALOM DOLEV - Shalom Dolev is SpaceLogic's Vice President for Security Systems.
Mr. Dolev has over 20 years experience in the field of airport security and is
an expert in security methodologies, with special emphasis in security
technologies for airport baggage handling. From 1992 to 1999, he served as a
consultant for various manufacturers of explosive detection equipment, including
Vivid and Magal. From 1985 to 1992, he was head of the Branch for Counter
Terrorism and Sabotage of the Israeli Security Agency. From 1982 to 1985, Mr.
Dolev was Security Officer of the Security Division of Ben Gurion International
Airport, Israel. He holds a BSc. degree in Electronics Engineering from Tel Aviv
University.

CATHAL ("IRISH") FLYNN - Rear Admiral Cathal L. (Irish) Flynn, USN (Ret.) has
acted as a consultant to SpaceLogic since 2003. Admiral Flynn has had a long and
distinguished career as a naval officer as well as in civilian and government
life. In the Navy, Admiral Flynn rose to the rank of Rear Admiral and commanded
many special operations units of the US Navy as well as serving as Deputy
Assistant Secretary of Defense for Special Operations. Following his retirement
from the Navy in 1990, Admiral Flynn joined Science Applications International
Corporation where he performed studies and analyses, and identified applications
for advanced technology in military special operations, counter-terrorism, and
aviation security. From 1993 to 2000, Admiral Flynn was the Associate
Administrator for Civil Aviation Security in the Federal Aviation
Administration. In 2002, he was awarded a Lifetime Award for Service to the
Aviation Security Community by Aviation Security International. During his term
of service, the FAA introduced far-reaching changes of regulations to improve
air carrier and airport security programs within the United States and abroad.
He is a director of Catcher Holdings, Inc., a publicly traded company and serves
on Catcher Holdings compensation, audit and corporate governance committees.
Admiral Flynn is a graduate of the University of Dublin, Trinity College.

SEAN DESON - Sean Deson, since January 2000, has been the Managing Partner of
Deson Ventures, LLC, and Managing Director of Deson & Co., Inc. both finance and
investment firms principally focused on high technology companies. Additionally,
since November 2002, Mr. Deson has been a Managing Director of Baytree Capital
Associates, LLC and the Managing Member of Treeline Management, LLC, also
finance and investment firms principally focused on high technology companies.
From 1990 to 2000, Mr. Deson was employed by Donaldson, Lufkin & Jenrette as an
Investment Banker. His last position was as Senior Vice President of the
Internet Investment Banking Group. Mr. Deson is a director of Activeworlds Corp.
and e-Centives, Inc., both publicly traded companies. Mr. Deson earned his BS in
Computer Technology and his MBA in Finance, both with Distinction from the
University of Michigan, Ann Arbor.


                                       21
<PAGE>

PAUL GOODMAN - has been a partner in the New York City law firm of Cyruli,
Shanks & Zizmor, LLP, and its predecessor firms for over 10 years. He
concentrates on representing software and Web companies in a wide range of
business and financing transactions. He has represented Aladdin since its
inception. In addition to a Juris Doctor degree, Mr. Goodman holds a BA and MA
degree in Computer Science. He was a former member of the Computer Science
faculty of Queens College, is the author of five books on microcomputer
programming.

TOMER NAHUM - Mr. Nahum joined the company in March 2005. Prior to SecureLogic,
he served as Corporate Controller in Nova Measuring Instrument LTD. Prior to
Nova, he served as finance manager of mergers and acquisitions in Intel Israel.
He began his career as an accountant at KPMG accounting firm. Mr. Nahum holds a
BA in Economics and Accounting from Jerusalem University, a MBA in finance and
accounting from Tel-Aviv University, and is a Certified Public Accountant in
Israel.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on the review of copies of such reports furnished to the Company during
the year ended December 31, 2005 all Section 16(a) filing requirements
applicable to the Company's officers, directors and greater than ten percent
shareholders were complied with.

Family Relationships

There are no family relationships between or among the directors, executive
officers or persons nominated or charged by the Company to become directors or
executive officers.


                                       22
<PAGE>

Involvement in Legal Proceedings

To the best of the Company's knowledge, during the past five years, none of the
following occurred with respect to a present or former director or executive
officer of the Company: (1) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (2) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (3) being
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of any competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and (4) being found
by a court of competent jurisdiction (in a civil action), the SEC or the
Commodities Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended
or vacated.

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. A copy of the Code of Ethics can be found as Exhibit 99
to our Form 10-KSB dated April 15, 2005.

ITEM 10.  EXECUTIVE COMPENSATION

COMPENSATION SUMMARY

The following table sets forth the compensation earned by our Chief Executive
Officer and all our other executive officers who earned in excess of $100,000 in
salary and bonus (collectively the "Named Executives") for services rendered to
us during the fiscal year.

                         SUMMARY COMPENSATION TABLE (1)


<TABLE>
<CAPTION>
                                                                              Long term
                                                                             compensation
                                                                               Number of
                                                     Number of options        securities
Name and position       Year    Salary     Bonus         cancelled        Underlying options
                        ----   --------   --------   ------------------   ------------------
                                                                                  (2)
<S>                     <C>    <C>               <C>                  <C>             <C>
Gary Koren              2005   $283,000          0                    0               52,000
Shalom Dolev            2005   $225,000          0                    0              127,000
Iftach Yeffet           2005   $174,750          0                    0               94,500
Michael Klein           2005   $174,750          0                    0               94,500
Avi Elyakim             2005   $107,000          0                    0                    0
</TABLE>


                                       23
<PAGE>

(1) The columns for "Other Annual Compensation", "Restricted Stock Awards", "LTP
Payouts" and "All other Compensation" have been omitted because there is no such
compensation to be reported.

(2) Represents options granted to such executives.

The following table sets forth certain information concerning options granted to
the named executives.

                OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                Number of                       Exercise
                               Securities     % of Total       Price Per
                               Underlying   Options Granted     Share
Name                    Year   Options (1)  to Employees (2)    ($/SH)     Expiration Date (3)
                        ----   ----------   ---------------    ---------   -------------------
<S>                     <C>        <C>                    <C>  <C>                  <C>
Gary Koren              2005       52,000                 8%   $    1.31            June, 2009
Shalom Dolev            2005      127,000                14%   $    1.42            June, 2009
Tomer Nahum             2005       50,000                 5%   $    1.30          August, 2010
Michael Klein           2005       94,500                14%   $    1.50            June, 2009
Iftach Yefet            2005       94,500                14%   $    1.50            June, 2009
</TABLE>


(1) Each option represents the right to purchase one share of our common stock.
(2) We granted officers, employees and consultants, options to purchase an
aggregate of 1,265,250 shares of our common stock.
(3) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability.

            AGGREGATE OPTION EXERCISES AND YEAR END OPTION VALUES (1)

The following table sets forth certain information with respect to the named
executives concerning exercisable and unexercisable stock options held by them
as of December 31, 2005. None of these officers exercised options to purchase
common stock in 2005.

<TABLE>
<CAPTION>
                                             Number of Unexercised         Value of Unexercised In-the-
                                              Options At year End           Money Options at Year End
                                Number of
                                 shares
Name                    Year   acquired on   Exercisable   Unexercisable   Exercisable   Unexercisable
                        ----    exercise     -----------   -------------   -----------   -------------
                              -----------
<S>                     <C>              <C>      <C>              <C>     <C>           <C>
Gary Koren              2005             0        50,500           1,500   $         0   $           0
Shalom Dolev            2005             0        69,250          57,750   $         0   $           0
Tomer Nahum             2005             0        33,333          16,667   $         0   $           0
Michael Klein           2005             0        23,625          70,875   $         0   $           0
Iftach Yefet            2005             0        23,625          70,875   $         0   $           0
</TABLE>


                                       24
<PAGE>

(1) Based on a per share fair market value of our common stock equal to $1.15
per share, the closing trading price market value of our common stock on
December 30, 2005.

COMPENSATION OF DIRECTORS

         In 2005, our non-employee Directors, Cathal Flynn, Sean Deson and Paul
Goodman, each received options to purchase up to 50,000 shares of Common Stock,
respectively, with exercise prices of $1.30 per share. The options were granted
as compensation for service as members of the Board of Directors and were
immediately vested.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables shows all directors and officers of the Company and all
persons known to the Company to be the beneficial owner of more than five
percent of the Company's common stock as of December 31, 2005.

                                         Amount and Nature of     Percent of
Name of Beneficial Owner               Beneficial Ownership (1)     Class
------------------------               ------------------------   ---------

EXECUTIVE OFFICERS AND DIRECTORS

Gary Koren (2)                                       16,688,898        30.0%
Shalom Dolev (3)                                      3,529,217         6.3%
Iftach Yeffet (4)                                     3,653,281         6.6%
Sean Deson (5)                                        2,365,963         4.3%
Cathal Flynn (6)                                        100,000           *
Paul Goodman (7)                                        241,000           *
Tomer Nahum (8)                                          33,333           *
                                       ------------------------   ---------
All directors and executive officers                 26,611,692        47.9%
  as a group (seven persons)

OTHER 5% STOCKHOLDERS

Michael Klein (9)                                  7,415,615        13.3%
Michael Gardner (10)                               4,478,471         8.1%
                                    ------------------------   ---------
All directors, executive officers
  and 5% stockholders as a group
  (nine persons)                                  38,505,778        62.9%

* Less than 1%

         (1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under
Rule 13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned by
such person, but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.


                                       25
<PAGE>

         (2) Includes 50,500 shares of Common Stock subject to options that were
exercisable at December 31, 2005.

         (3) Includes 69,250 shares of Common Stock subject to options that were
exercisable at December 31, 2005.

         (4) Includes 23,625 shares of Common Stock subject to options that were
exercisable at December 31, 2005.

         (5) Includes 50,000 shares of Common Stock subject to options that were
exercisable at December 31, 2005. Additionally Mr. Deson is the Managing Member
of Treeline Management, LLC, which holds 2,136,926 shares, which includes
550,963 shares subject to an option to acquire such shares directly from the
Company and 830,000 shares subject to a right to acquire such shares from
another stockholder, both exercisable at December 31, 2005.

         (6) Includes 100,000 shares of Common Stock subject to options that
were exercisable at December 31, 2005.

         (7) Includes 200,000 shares of Common Stock subject to options that
were exercisable at December 31, 2005.

         (8) Includes 33,333 shares of Common Stock subject to options that were
exercisable at December 31, 2005.

         (9) Includes 23,625 shares of Common Stock subject to options that are
exercisable at December 31, 2005.

         (10) Includes 550,963 shares of Common Stock subject to warrants that
were exercisable at December 31, 2005.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In June, 2003, the Company's SpaceLogic, Ltd. subsidiary agreed to guarantee a
bank loan issued to Paradigma, Ltd., a privately held Israeli company which
develops software for the long term healthcare industry. Paradigma, Ltd. is a
related entity since its principal beneficial stockholders are Gary Koren, Tony
Gross and Iftach Yeffet. In connection with such guarantee, SpaceLogic posted
security in the form of a certificate of deposit in the amount of $66,000. At
the time that such transaction was entered into, SpaceLogic, Ltd. was privately
owned by Gary Koren, Tony Gross and Iftach Yeffet. On an annual basis, the
guarantee must either be renewed or the collateral forfeited. In June, 2005,
SpaceLogic renewed the guarantee in favor of the related entity.

In January, 2001, the Company's SpaceLogic, Ltd. subsidiary entered into a six
month convertible loan agreement with Paradigma, Ltd., a privately held Israeli
company which develops software for the long term healthcare industry, pursuant
to which SpaceLogic lent to Paradigma the sum of $150,000, at an interest rate
of 8%. At the time that such transaction was entered into, SpaceLogic, Ltd. was
privately owned by Gary Koren, Tony Gross and Iftach Yeffet. Paradigma failed to
repay the loan and, in 2001, the loan was extended until December 31, 2005. Due
to the related party's deteriorated financial position, in 2003, SpaceLogic
recorded a provision for the impairment of the loan and a write-off was recorded
in other expenses in the statement of operations. The related entity failed to
pay the loan on December 31, 2005 and is currently in default. As of today, the
outstanding debt, with interest, is approximately $210,000.


                                       26
<PAGE>

In 2004, the Company's SpaceLogic, Ltd. subsidiary entered into an agreement
with Paradigma, Ltd., a privately held Israeli company to share certain expenses
related to shared office space located in Netanya, Israel. At the time that such
transaction was entered into, SpaceLogic, Ltd. was privately owned by Gary
Koren, Tony Gross and Iftach Yeffet. Pursuant to such agreement, during calendar
year 2005, Paradigma paid $13,000 towards shared office expenses on behalf of
SpaceLogic and such amount was applied to SpaceLogic to reduce the outstanding
amount owed to SpaceLogic by Paradigma. The current amount owed by the related
party to the Company is $28,000.

On May 12, 2005, the Company entered into an Executive Employment Agreement with
Gary Koren, the Company's Chief Executive Officer and a Chairman of the Board of
Directors.

On May 12, 2005, the Company entered into an Executive Employment Agreement with
Shalom Dolev, a member of the Board of Directors.

Paul Goodman, a director of the Company, has provided legal services to the
Company since 1999 and is currently the Company's corporate attorney. The fees
paid to Mr. Goodman (or firms to which he is associated) were $37,000 and
$112,668 for 2005 and 2004, respectively.

Admiral Cathal Flynn, a director of the Company, has provided consulting
services to the Company. The fees paid to Admiral Flynn were $68,000 and $40,000
for 2005 and 2004, respectively.

In December, 2005, the Company entered into a Consulting Agreement with Baytree
Capital Associates, LLC. Sean Deson, a Director of the Company, is a Managing
Director of Baytree Capital Associates, LLC.


                                       27
<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this Report:

1.  Financial Statements

The following consolidated financial statements of SecureLogic Corp. and the
Independent Auditors' Report issued thereon, are incorporated by reference in
Part II, Item 7:

Report of Independent Registered Public Accountants Brightman Almagor & Co.
  and Ernest & Young, LLP
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statement of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

2.  Exhibits

The following exhibits are filed as part of, or incorporated by reference into
this Report:

Exhibit                  Contents

3.1      Articles of Incorporation of the Registrant.*
3.2      Certificate of Amendment to the Articles of Incorporation of the
         Registrant.*
3.3      By-Laws of Registrant.*
4.1      Sample Stock Certificate of the Registrant.*
31.1     Certification of Chief Executive Officer, as required by Rule 13a-14(a)
         of the Securities Exchange Act of 1934
31.2     Certification of Chief Financial Officer, as required by Rule 13a-14(a)
         of the Securities Exchange Act of 1934
32.1     Certification of Chief Executive Officer, as required by Rule 13a-14(b)
         of the Securities Exchange Act of 1934
32.2     Certification of Chief Financial Officer, as required by Rule 13a-14(b)
         of the Securities Exchange Act of 1934
99.1     Senior Management Ethics Policy** * Incorporated into this Report by
         reference to the Registrant's Registration Statement on Form 10 dated
         November 15, 1999.
         ** Included in Form-10KSB filed April 15, 2005


                                       28
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees and services billed by Grant
Thornton LLP, Brightman Almagor & Co. and Kost Forer Gabbay & Kasierer for the
fiscal years ended December 31, 2005 and 2004:

                                                       2005       2004
                                                     --------   --------
Grant Thornton LLP
  Audit fees                                         $  7,500   $ 38,400
  Audit-Related Fees                                        0      4,440
  Tax Fees                                           $ 12,500     10,890
                                                     --------   --------
Total fees from Grant Thornton LLP                   $ 20,000   $ 54,370
Brightman Almagor & Co., a member
  firm of Deloitte Touche Tohmatsu
  Audit fees                                         $ 44,000          0
  Audit-Related Fees                                        0          0
  Tax Fees                                                  0          0
                                                     --------   --------
Total fees from Brightman Almagor & Co.              $ 44,000   $      0
Kost Forer Gabbay & Kasierer,
  a Member of Ernest & Young Global
  Audit fees                                                0   $ 85,000
  Audit-Related Fees                                 $ 10,000          0
  Tax Fees                                                  0     11,000
                                                     --------   --------
Total fees from Kost Forer Gabbay & Kasierer         $ 10,000   $ 84,000



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.

SECURELOGIC CORP.
(Registrant)

By /s/ Gary Koren
   ------------------------------
  (Gary Koren, Chief Executive Officer, President and Director)

By /s/ Tomer Nahum
   ------------------------------
  (Tomer Nahum, Chief Accounting Officer, Chief Financial Officer, Secretary)


                                       29
<PAGE>

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 below.

--------------------------------------------------------------------------------

Signature                         Title                         Date

/s/ Gary Koren                    Chief Executive Officer,      April 12, 2006
-------------------------           President and Director
(Gary Koren)

/s/ Shalom Dolev                  Director                      April 12, 2006
-------------------------
(Shalom Dolev)

/s/  Sean Deson                   Director                      April 12, 2006
-------------------------
(Sean Deson)
/s Cathal Flynn                   Director                      April 12, 2006
-------------------------
(Cathal Flynn)

/s/ Paul Goodman                  Director                      April 12, 2006
-------------------------
(Paul Goodman)



EXHIBIT INDEX

Exhibit                     Contents

3.1      Articles of Incorporation of the Registrant.*
3.2      Certificate of Amendment to the Articles of Incorporation of the
         Registrant.*
3.3      By-Laws of Registrant.*
4.1      Sample Stock Certificate of the Registrant.*
31.1     Certification of Chief Executive Officer, as required by Rule 13a-14(a)
         of the Securities Exchange Act of 1934
31.2     Certification of Chief Financial Officer, as required by Rule 13a-14(a)
         of the Securities Exchange Act of 1934
32.1     Certification of Chief Executive Officer, as required by Rule 13a-14(b)
         of the Securities Exchange Act of 1934
32.2     Certification of Chief Financial Officer, as required by Rule 13a-14(b)
         of the Securities Exchange Act of 1934
99.1     Senior Management Ethics Policy**
         * Incorporated into this Report by reference to the Registrant's
         Registration Statement on Form 10 dated November 15, 1999.
         ** Included in Form-10KSB filed April 15, 2005


                                       30