U.S. SECURITIES AND EXCHANGE
                                   COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10-KSB/A



      |X| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2004.

      |_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .

                                   ----------

                             MONTEREY BAY TECH, INC.
                    (Formerly Aladdin Systems Holdings, Inc.)
             (Exact name of registrant as specified in its charter)


<TABLE>
<CAPTION>
<S>                                                                   <C>
-----------------------------------------------------------------------------------------------------------------------
                         NEVADA                                                     77-0571784
-----------------------------------------------------------------------------------------------------------------------
    (State or Other Jurisdiction of Incorporation or                  I.R.S. Employer Identification Number
                     Organization)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


               245 WESTRIDGE DRIVE, WATSONVILLE, CALIFORNIA 95076
              (Address of Principal Executive Offices and Zip Code)

                    Issuer's Telephone Number: (831) 761-6200


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

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 |_|

<PAGE>

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. [ ]

Issuer's revenues for its most recent fiscal year: $0.00

Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on March 24, 2005:
$1,191,132

Number of shares outstanding of each of the registrant's classes of common stock
as of March 24, 2005: Common Stock: 11,019,266

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>

                             MONTEREY BAY TECH, INC.
                         2004 FORM 10-KSB ANNUAL REPORT
                                Table of Contents


<TABLE>
<CAPTION>
<S>                                                                                          <C>
Trademarks/Definitions                                                                        3

PART I
Item 1.      Business                                                                         4
Item 2.      Properties                                                                       5
Item 3.      Legal Proceedings                                                                5
Item 4.      Submission of Matters to a Vote of Security Holders                              5

PART II
Item 5.      Market for the Registrant's Common Equity and Related Stockholder Matters        5
Item 6.      Management's Discussion and Analysis or Plan of Operations of Financial
             Condition and Results of Operations                                              7
Item 7.      Financial Statements                                                            11
Item 8.      Changes In and Disagreements With Accountants on Accounting And Financial
             Disclosure                                                                      32
Item 8a.     Controls and Procedures                                                         33
Item 8b.     Other Information                                                               34

PART III
Item 9.      Directors and Executive Officers of the Registrant                              34
Item 10.     Executive Compensation                                                          36
Item 11.     Security Ownership of Certain Beneficial Owners and Management                  38
Item 12.     Certain Relationships and Related Transactions                                  39
Item 13.     Exhibits, Financial Statements, and Reports on Form 8-K                         40
Item 14.     Principal Accountant Fees and Services                                          41
Signatures                                                                                   42
</TABLE>


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 "MBYI" refer to the consolidated operations of Monterey Bay Tech,
Inc., a Nevada corporation, (b) "you" refers to the readers of this Form 10-KSB,
(c) the "Web" refers to the World Wide Web.


                                       3
<PAGE>

PART I

ITEM 1.  BUSINESS

We were formerly a technology holding company located in Watsonville,
California. Prior to April, 2004, through two wholly-owned subsidiaries, Aladdin
Systems, Inc. ("Aladdin Systems") and Aladdin Enterprise Solutions, Inc.
("Aladdin Enterprise"), we focused on providing software products that align
people, business and technology and served the consumer, small business and
corporate enterprise markets through two separate wholly-owned subsidiaries. In
April, 2004, we sold both of our operating subsidiaries, in two unrelated
transactions. The terms of the transactions are discussed at length under
"Discontinued Operations" in Item 6 below.

On November 11, 2004, the Company completed the change of its corporate name
from "Aladdin Systems Holdings, Inc." to "Monterey Bay Tech, Inc." (the
"Company"). The Company has not yet changed it reporting name with the
Securities and Exchange Commission for Edgar reporting purposes.

Since April, 2004, we have not had an operating business and our business plan
has been to seek, investigate, and, if warranted, acquire an interest in a
business opportunity. Our search for a business opportunity was not limited to
any particular geographical area or industry, including both U.S. and
international companies. Our management had unrestricted discretion in seeking
and participating in a business opportunity, subject to the availability of such
opportunities, economic conditions and factors. Management believes that
companies who desire a public market to enhance liquidity for current
stockholders, or plan to acquire additional assets through issuance of
securities rather than for cash would be potential merger or acquisition
candidates.

On December 20, 2004, the Company signed a Letter of Intent to acquire
SpaceLogic, Ltd., an Israeli corporation ("SpaceLogic "). SpaceLogic develops
systems for US and international airports that unify baggage screening and
secured baggage handling systems into a single integrated solution.

As further set forth below in the section entitled "Subsequent Events", on
February 17, 2005, the Company executed a Stock Purchase Agreement with
SpaceLogic and its stockholders, pursuant to which the Company will purchase all
of the issued and outstanding capital stock of SpaceLogic from its stockholders
(the "SpaceLogic Transaction").

EMPLOYEES

As of December 31, 2004, the Company had three part-time employees.

SUBSIDIARIES

We currently have no subsidiaries.

FORWARD-LOOKING STATEMENTS


                                       4
<PAGE>

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.

The Company cautions the reader that this list of factors is not intended to be
exhaustive. The Company operates in a continually changing business environment,
and new risk factors emerge from time to time. Management cannot predict such
factors, nor can it assess the impact, if any, of such factors on the Company's
business or the extent to which any factors may cause actual results to differ
materially from those described in any forward-looking statement. 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

The Company does not own or lease any property. The Company maintains its
executive offices, within the office space leased by its former Allume Systems
(formerly, Aladdin Systems) subsidiary. This executive office space is
sufficient for the Company's current needs.

ITEM 3.  LEGAL PROCEEDINGS

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 $550,000 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 our former Aladdin Systems subsidiary.
In 2004, the Company received $420,000 from AKS and the balance due to the
Company in May 2007 is $130,000. Pursuant to our Stock Purchase Agreement with
IMSI, IMSI was entitled to receive 50% of the total amount of $550,000 after
deducting expenses associated with defending the AKS litigation. Since the total
costs of this litigation were $599,000, no money was due to IMSI.

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

None

PART II


                                       5
<PAGE>

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

As of December 31, 2004, there were 39 stockholders of record. The Company
believes that it has approximately 300 beneficial stockholders.

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

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, 2003                          $ 0.15                  $ 0.43
June 30, 2003                           $ 0.26                  $ 0.51
September 30, 2003                      $ 0.20                  $ 0.36
December 31, 2003                       $ 0.21                  $ 0.40
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


The Company has never declared, nor has it paid, any cash dividends on its
Common Stock. Upon the consummation of the SpaceLogic Transaction, the Company
may pay a cash dividend or distribute certain assets of the Company. There can
be no assurance that any such dividend will be paid.

The Company currently has a compensation plan for the issuance of stock options,
the 1999 Incentive Stock Option Plan which has been approved by the
shareholders. Our Stock Option Plan 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, 2004. 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.


                                       6
<PAGE>

<TABLE>
<CAPTION>
<S>                                  <C>                       <C>                 <C>
Plan category                         Number of shares to be    Weighted-average
                                     issued upon exercise of   exercise price of
                                       outstanding options        outstanding          Number of shares
                                                                    options        remaining available for
                                                                                       future issuance
Equity compensation plans approved
by stockholders                              1,857,753                $0.74                1,142,247
</TABLE>

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

Results of Operations

The Company has had no revenue generating operations since the sale of both
subsidiaries in April 2004.

Since we had no operating business for most of 2004, our general and
administrative expenses were mostly for professional services. Total general and
administrative expenses in 2003 were $379,070 compared to $913,786 in 2004. This
increase was primarily due to the issuance of one-time bonuses in the amount of
$526,600. Non-recurring expenses related to the AKS lawsuit were $328,326 in
2003 and $272,520 in 2004.

Interest

Interest income is comprised of interest earnings on cash and notes receivable.
Interest income in 2004 was $83,462. No interest income was recorded for the
Company in 2003, from continued operations, since all the cash was held in one
of the subsidiaries, which was sold.

Other income

Other income is comprised of $550,000 as a result of the settlement of a
trademark infringement lawsuit with AKS. The Company has received $420,000 of
the $550,000 as of December 31, 2004, with the remaining $130,000 due in 2007.
Other income also included the unrealized loss of $913,287 on marketable
securities.

Discontinued Operations

On April 16, 2004, the Company sold its Aladdin Enterprise Solutions, Inc.
("AES") subsidiary to AES Management Buyout Company, a Delaware corporation
("AMBO"), pursuant to a Stock Purchase Agreement. This was a related party
transaction because Mr. Kwok Li was previously a director of the Company and is
also the controlling shareholder of AMBO. The purchase price consisted of a
six-month secured note payable in the amount of $550,000, a thirty-month secured
note payable in the amount of $641,050, the receipt of 1,146,246 shares of AMBO
common stock and the return of 1,375,000 shares of common stock of the Company.
As management determined that the collectbility of the notes receivable was not


                                       7
<PAGE>

reasonably assured, the Company has not recorded the related notes and
therefore, did not include the notes receivable in the gain on the sale of the
subsidiary for the year ending December 31, 2004. The Company will recognize any
resulting gain on the sale of AES when and if, the related notes receivable
balances are collected. Both notes are secured by an Intellectual Property
Security Agreement covering the intellectual property assets owned by AES and a
Pledge Agreement covering all of the issued and outstanding shares of AES. The
Company also received the return of 1,375,000 shares of the Company's common
stock previously issued to the original shareholders of AES (prior to the
acquisition of AES by the Company) and 1,146,246 newly issued and unregistered
shares of AMBO common stock. The 1,375,000 shares of common stock were valued
based on the market share price of our common stock on April 16, 2004, which was
$0.59 per share, for an aggregate amount of approximately $812,000. Management
is unable to determine the value of the 1,146,246 AMBO shares received due to
the lack of market for such shares and the unavailability of financial
information regarding AMBO. Accordingly, management has valued these shares at
zero. The Company, pursuant to the sale of AES, recorded a before tax gain on
the sale in the amount of $717,035 and has classified all prior operations as
discontinued operations.

As of December 31, 2004, although due, the Company had not received payment of
the $550,000 principal due under the six-month secured promissory note and
interest thereon and had not received the first payment due under the
thirty-month promissory note. AMBO has informed the Company that it has been
unable to secure the funding it initially expected and has requested extended
terms on both notes. The Company has yet to provide AMBO with a notice of
default of the notes and the associated security agreements and the Company is
currently negotiating a forbearance of the payments under both notes.

In February 2005, the Company received $10,000 from AMBO, which was applied to
the accrued interest on the notes. The Company is still uncertain about
collecting the entire amount on the notes.

On April 19, 2004, the Company sold its, Aladdin Systems, Inc. subsidiary to
International Microcomputer Software, Inc. ("IMSI") pursuant to a Stock Purchase
Agreement. The consideration paid consisted of a combination of cash in the
amount of $1,500,000, subject to a 10% escrow; 2,317,881 newly issued shares of
IMSI common stock and two three-year secured convertible notes in the aggregate
amount of $3,000,000. The number of shares of common stock received was equal to
$3,500,000 divided by the average of the closing "bid" price of IMSI's common
stock for the twenty (20) trading days prior to the closing date of April 19,
2004.

Furthermore, pursuant to the Stock Purchase Agreement, the Company may have been
entitled to additional cash earn-out payments, up to an aggregate of $2,000,000,
based on net revenues derived from Aladdin Systems for the three consecutive
twelve- month periods following the closing date of April 19, 2004.

On September 2, 2004, the Company entered into a Modification Agreement with
IMSI, which modified certain provisions of the Stock Purchase Agreement and then
on September 10, 2004, the Company entered into an Amendment to the Modification


                                       8
<PAGE>

Agreement (collectively, the "Amended Modification Agreement"). Pursuant to the
terms of the Amended Modification Agreement, the following modifications were
made to the provisions of the Stock Purchase Agreement:

      1. The total amount of the Earn-Out Payments was fixed at a sum certain of
$1,700,000, payable in cash and IMSI common stock as follows:

      (a) The amount of $666,667 payable in cash, on or before June 2, 2005.

      (b) The value of $1,033,833 in newly issued restricted shares of IMSI
stock, no par value. Management estimated the fair value of the shares of common
stock to be $0.97 per share based on the closing bid price of IMSI common stock
on September 2, 2004, the date of execution of the Modification Agreement. The
Company received 1,065,807 shares of IMSI stock.

      Due to the guaranteed cash portion of the Modification Agreement, the
Company recognized an additional gain on the sale of Aladdin Systems..

      On March 4, 2005 the Company entered into a Modification Agreement with
IMSI, which modified certain provisions of the September 2,2004 and September
10, 2004 Modification Agreement (collectively, the "Amended Modification
Agreement"). Pursuant to the terms of the March 4, 2005 Modification Agreement,
the following modifications were made to the provisions of the Stock Purchase
Agreement.

      (a) The payment of $666,667 will now be on or before August 15, 2005

      (b) IMSI will amend the SB-2 Stock Registration Statement to extend the
registration period to the end of June 2005.

The gain on the sale of each subsidiary is summarized in the table below:

<TABLE>
<CAPTION>
                                   AES           Systems      Total
                                   ---           -------      -----
<S>                             <C>          <C>           <C>
Carrying value                 $    60,029   $ 1,275,512   $ 1,335,541
Expenses associated with the
sale                                34,186       172,560       206,746
Investment associated with
the sale                                --       110,062       110,062
Consideration                      811,250     9,700,500    10,511,750

Gain                           $   717,035   $ 8,142,366   $ 8,859,401
Tax on Gain                        285,607     3,243,239     3,528,846
                               -----------   -----------   -----------
Gain, net of tax               $   431,428   $ 4,899,127   $ 5,330,555
</TABLE>

Results of Discontinued Operations

Due to the sale of our two operating subsidiaries, the Company has reported the
current and prior year operations as discontinued operations. The loss from


                                       9
<PAGE>

discontinued operations, net of income taxes, for the twelve months ended
December 31, 2004 was $132,039 compared to a net loss of $492,709 for the twelve
months ended December 31, 2003. The net income from discontinued operations, net
of income taxes, for the twelve months ended December 31, 2004 was $5,198,516
compared to a loss of $492,709 for the twelve months ended December 31, 2003.

Critical Accounting Polices and Estimates

In preparing our financial statements, management makes assumptions, judgments
and estimates that can have a significant impact on amounts recorded in our
financial statements. We base our assumptions, judgments and estimates on
historical experience and other factors that we believe to be reasonable under
the circumstances. Actual results could differ materially from these estimates
under different assumptions or conditions. Management believes the Company's
critical accounting policies and estimates are those related to the
collectibility of notes receivable, the value of our marketable securities and
the value of our stock options. Management estimates that the principal and
interest due on the IMSI notes will be collected in accordance with their terms.
In the event that the IMSI notes are not collected, in whole or in part, on a
timely basis, our expected cash flow would change materially. In addition, due
to market conditions, the price of IMSI common stock could drop and therefore
affect the value we would obtain upon its sale

INCOME TAXES

The Company's effective tax rate was (19.39%) for fiscal 2004 and 0.04% for
fiscal 2003.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities during 2004 was $1,708,934 compared with
net cash provided by operating activities of $257,572 in 2003.

Net cash provided by investing activities was $2,312,588 in 2004 was mostly due
to the proceeds from the sale of our Aladdin Systems and Aladdin Enterprise
Solutions subsidiaries and the cash collected on the notes receivable related to
the sale of such subsidiaries.

At December 31, 2004, the Company had cash and cash equivalents totaling
$1,120,459 and notes or other receivables over the next 12 months in the amount
of $1,666,667. In addition, the Company held 3,383,688 shares of International
Microcomputer Software, Inc. ("IMSI") common stock which at December 31, 2004,
had a market value of $3,620,546.

Our capital requirements have decreased since the sale of our operating
subsidiaries in April, 2004. Over the next 12 months, our capital requirements
will vary greatly depending upon the closing of the SpaceLogic Transaction.
Until such time as the SpaceLogic Transaction closes, our fixed payment
commitments are limited and include payments to our part-time employees, if any,
payments on demand notes and payments for legal and accounting professional


                                       10
<PAGE>

services, as needed. We believe that our current cash and cash equivalents will
be sufficient to meet our anticipated cash needs for working capital, fixed
payment commitments and capital expenditures for the next 12 months.

Upon the closing of the SpaceLogic Transaction, our capital requirements will
increase greatly to include payroll for SpaceLogic's employees, office
facilities and working capital. Based upon information provided to us by
SpaceLogic's management, we believe that our current cash and payments
receivable, together with the amount of $1,000,000 we expect to raise in a
potential private placement of newly issued shares of our common stock to be
sold at $0.45 per share will be sufficient to meet our post-closing liquidity
needs. Furthermore, in the event that holders of any of our outstanding options
shall elect to exercise such options, the Company will receive additional
amounts of cash which can be used as working capital, although, the number of
such options exercises, if any and the cash to be received by the Company cannot
be predicts.

In addition, pursuant to our agreement with SpaceLogic, upon the closing of the
SpaceLogic Transaction, our IMSI common stock together with our interest in AMBO
and the AMBO notes as well as certain other non material assets, will be
distributed to our pre-closing stockholders and/or transferred to a new entity
owned by or for the benefit of our pre-closing stockholders. Thus, such
marketable securities and other assets will not be available to meet our capital
requirements. Although the management of SpaceLogic has indicated that such
amounts will be sufficient to cover the post-closing capital requirements,
SpaceLogic is implementing a new business plan and it is not entirely possible
to forecast SpaceLogic's capital requirements for the next 12 months. If our
current cash is insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or to obtain a credit facility. The
issuance 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 sufficient 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 take advantage of business opportunities.
Any of these events could have a material and adverse effect on our business,
results of operations and financial condition.

We have no off-balance sheet arrangements.

RISKS AND UNCERTAINTIES

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

      o     Limited cash resources as a result of no current operations

      o     No revenue or cash generated operations

      o     Few employees o Realization of the IMSI investments

      o     Realization of the AMBO investments

      o     Market fluctuations in the IMSI investments

      o     Collection of notes receivables


                                       11
<PAGE>

      o     Inability to find suitable and successful new businesses or
            investments and inability to complete the transaction with new
            suitor in the event that we do not consummate the SpaceLogic
            transaction

      o     The liquidity of our stock

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

<TABLE>
<CAPTION>
<S>                                                                             <C>
Index to Item 7:  Financial Statements                                        Page
Report of Independent Certified Public Accountants Stonefield Josephson, Inc.   12
Report of Independent Registered Public Accounting Firm Grant Thorton, LLP      13
Balance Sheet                                                                   14
Statements of Operations                                                        15
Statements of Stockholders' Equity                                              17
Statements of Cash Flows                                                        18
Notes to Financial Statements                                                   20
</TABLE>


                                       12
<PAGE>

               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS



Audit Committee and Board of Directors
Monterey Bay Tech, Inc. (formerly known as Aladdin Systems Holdings, Inc.)
Watsonville, California


We have audited the accompanying balance sheet of Monterey Bay Tech, Inc. as of
December 31, 2004, and the related statements of operations, stockholders'
equity, and cash flows for the year ended December 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audits.

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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Monterey Bay Tech, Inc. as of
December 31, 2004, and the results of its operations and its cash flows for the
year ended December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.



/s/Stonefield Josephson, Inc.

CERTIFIED PUBLIC ACCOUNTANTS

Irvine, California
March 11, 2005


                                       13
<PAGE>

               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
Monterey Bay Tech, Inc. (formerly Aladdin Systems Holdings, Inc.)

We have audited the accompanying consolidated balance sheet of Monterey Bay
Tech, Inc. (formerly Aladdin Systems Holdings, Inc.) and Subsidiaries (the
"Company") as of December 31, 2003, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the two years 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 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 examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

/s/ Grant Thornton LLP

San Francisco, California
February 27, 2004


                                       14
<PAGE>

                             Monterey Bay Tech. Inc.
               (Formerly known as Aladdin Systems Holdings, Inc.)

                                  BALANCE SHEET
                                December 31, 2004

                                 ASSETS
<TABLE>
<CAPTION>
<S>                                                                            <C>
Current Assets:
  Cash and cash equivalents                                                    $1,120,459
  Notes receivable - IMSI current                                               1,666,667
  Notes receivable - IMSI escrow note                                             150,000
  Marketable Securities                                                         3,620,546
  Prepaid expenses                                                                 29,167
                                                                               ----------
    Total current assets                                                        6,586,839

Property and equipment, net                                                        11,769

Notes receivable - IMSI long term                                               1,516,688
Notes receivable - Legal settlement                                               130,000
                                                                               ----------

                              Total Assets                                     $8,245,296
                                                                               ==========

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Related party notes payable                                                  $  110,062
  Other payable                                                                    24,500
  Accounts payable                                                                 17,470
  Income tax payable                                                               16,200
  Deferred tax liability                                                        1,425,497
                                                                               ----------
    Total current liabilities                                                   1,593,729



Stockholders' Equity:
Preferred stock, $.001 par value:  1,000,000 shares authorized;
  none  issued and outstanding                                                         --
Common stock, $.001 par value;  50,000,000 shares authorized;
  11,019,266 issued and outstanding                                                11,019
Paid-in capital                                                                 1,489,068
Retained earnings                                                               5,151,480
                                                                               ----------
  Total stockholders' equity                                                    6,651,567
                                                                               ----------

               Total Liabilities and Stockholders' Equity                      $8,245,296
                                                                               ==========
</TABLE>

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


                                       15
<PAGE>

                             Monterey Bay Tech, Inc.
                    (Formerly Aladdin Systems Holdings, Inc.)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                      Year ended December 31,
                                                       2004            2003
                                                   ------------    ------------
<S>                                                <C>             <C>
Sales                                              $         --    $         --
Cost of sales                                                --              --
                                                   ------------    ------------

Gross profit                                                 --              --

Operating Expenses:
   Marketing, sales and support                           2.027              --
   General and administrative                           913,786         379,070
                                                   ------------    ------------

Total operating expenses                                915,813         379,070
                                                   ------------    ------------

Operating loss from continuing
    operations                                         (915,813)       (379,070)

Other Income (expense):
   Interest                                              83,462              --
   Other income - settlement of a lawsuit               550,000              --
   Other income -unrealized loss on
      trading securities                               (913,287)             --
   Interest expense                                      (7,399)         (9,657)
                                                   ------------    ------------

Loss from continuing operations
   before income taxes                               (1,203,037)       (388,427)

Income tax benefit                                   (1,999,740)             --
                                                   ------------    ------------

Income (loss) from continuing operations
                                                        796,703        (388,427)

Gain on sale of subsidiaries, net
   of income taxes of $3,528,846                      5,330,555              --
Loss from operations of discontinued
subsidiaries net of income tax benefit of              (132,039)       (492,709)
$87,409 in 2004 and $3,200 in 2003
                                                   ------------    ------------
Income (loss) from
   discontinued operations                            5,198,516        (492,709)
                                                   ------------    ------------

Net income  (loss)                                 $  5,995,219    $   (881,136)
                                                   ============    ============

Basic income (loss) per share:
    Income (loss) per share from
      continuing operations                        $       0.07    $      (0.03)
     Income (loss) per share from
       discontinued operations                     $       0.46    $      (0.04)
     Net income (loss) per share                   $       0.53    $      (0.07)

Diluted income (loss) per share:
    Income (loss) per share from
      continuing operations                        $       0.07    $      (0.03)
    Income (loss) per share from
       discontinued operations                     $       0.44    $      (0.04)

     Net income (loss) per share                   $       0.51    $      (0.07)

Shares used in computing basic income (loss) per
share                                                11,355,787      12,230,272
                                                   ============    ============
Shares used in computing diluted income (loss)
per share                                            11,809,664      12,230,272
                                                   ============    ============
</TABLE>


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


                                       16
<PAGE>

                             Monterey Bay Tech, Inc.
               (Formerly known as Aladdin Systems Holdings, Inc.)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                      Common Stock                        Retained Earnings
                                      ------------             Paid -in     (Accumulated
                                Shares          Amount         Capital         Deficit)          Total
                             ------------    ------------    ------------    ------------    ------------
<S>                          <C>             <C>             <C>             <C>             <C>
Balance at January 1, 2003     12,230,272    $     12,230    $  2,144,841    $     37,397    $  2,194,468

Expense on issuance of
stock options to third
parties                                                             8,640                           8,640
Net loss                                                                         (881,136)       (881,136)
                             ------------    ------------    ------------    ------------    ------------

Balance at December 31,
  2003                         12,230,272          12,230       2,153,481        (843,739)      1,321,972

Issuance of common stock
for services rendered             163,994             164          98,232                          98,396
Expense on issuance of
stock options to third
parties
                                                                   47,230                          47,230
Return and retirement of
common stock pursuant to
the sale of AES subsidiary     (1,375,000)         (1,375)       (809,875)                       (811,250)
Net income                                                                      5,995,219       5,995,219
                             ------------    ------------    ------------    ------------    ------------

Balance at December 31,
  2004                         11,019,266    $     11,019    $  1,489,068    $  5,151,480    $  6,651,567
                             ============    ============    ============    ============    ============
</TABLE>



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


                                       17
<PAGE>

                             Monterey Bay Tech, Inc.
                    (Formerly Aladdin Systems Holdings, Inc.)

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                                 2004            2003
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                          $  5,995,219    ($   881,136)
  Adjustments to reconcile net income (loss) to net cash
     Provided by operating activities:
  Depreciation and amortization                                                     4,846           3,952
  Compensation expense on stock and options granted to                                 --
     Third parties                                                                145,626
  Income tax benefit                                                           (1,999,740)             --
  Other income - settlement of a lawsuit                                         (550,000)             --
  Loss on disposal of property and equipment                                           --
  Gain on the sale of subsidiaries                                             (5,330,555)             --
  Unrealized loss  on trading securities                                          913,287              --
  Interest on notes receivable                                                    (78,799)             --
  Changes in operating assets and liabilities:
     Prepaid expenses and other current assets                                      5,832              --
     Accounts Payable                                                          (698,380))         285,587
   Discontinued operations                                                       (116,270)        849,169
                                                                             ------------    ------------
Cash provided by (used in) operating activities                                (1,708,934)        257,572

Cash flows from investing activities:
  Proceeds from the sale of subsidiaries                                        1,350,000              --
  Cash provided by notes receivable from the sale of
    subsidiaries                                                                  562,111
  Cash provided by legal settlement                                               420,000
  Cash used by discontinued operations in investing
    activities                                                                    (19,523)       (268,254)
                                                                             ------------    ------------
         Net cash provided by (used in) investing activities                    2,312,588        (268,254)

Cash flows from financing activities:
  Principal payments on note payable                                              (10,500)             --
  Cash provided by (used by) discontinued operations
      In financing activities                                                      65,725        (111,391)
                                                                             ------------    ------------
       Net cash provided by (used in) financing activities                         55,225        (111,391)
                                                                             ------------    ------------

      Net increase (decrease) in cash and cash equivalents                        658,879        (122,073)

Cash and cash equivalents at beginning of period                                  461,580         583,653
                                                                             ------------    ------------

Cash and cash equivalents at end of period                                   $  1,120,459    $    461,580
                                                                             ============    ============

Other supplemental cash flow disclosures: Cash paid during the period for:
Interest                                                                     $     11,896    $     18,365
                                                                             ============    ============
Notes receivable on sale of subsidiaries                                     $  3,816,667              --
                                                                             ============    ============
</TABLE>

See accompanying notes to financial statements for additional discussion on
non-cash investing and financing activities


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


                                       18
<PAGE>

                             Monterey Bay Tech, Inc.
                    (Formerly Aladdin Systems Holdings, Inc.)

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 2004


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Monterey Bay Tech, Inc. (formerly, Aladdin Systems Holdings, Inc.) was formerly
a technology holding company. Prior to April, 2004, through two wholly-owned
subsidiaries, Aladdin Systems, Inc. ("Aladdin Systems") and Aladdin Enterprise
Solutions, Inc. ("Aladdin Enterprise"), the Company focused on providing
software products that align people, business and technology and served the
consumer, small business and corporate enterprise markets. In April, 2004, the
Company sold both of its operating subsidiaries, in two separate transactions.

On November 11, 2004, the Company completed the change of its corporate name
from "Aladdin Systems Holdings, Inc." to "Monterey Bay Tech, Inc." (the
"Company").

Since April, 2004, the Company has not had an operating business and its
business plan has been to seek, investigate, and, if warranted, acquire an
interest in a business opportunity.

On December 20, 2004, the Company signed a Letter of Intent to acquire
SpaceLogic, Ltd., an Israeli corporation ("SpaceLogic "). SpaceLogic develops
systems for US and international airports that unify baggage screening and
secured baggage handling systems into a single integrated solution.

On February 17, 2005, the Company executed a Stock Purchase Agreement with
SpaceLogic and its stockholders, pursuant to which the Company will purchase all
of the issued and outstanding capital stock of SpaceLogic from its stockholders.

Income Taxes

Income taxes are computed using the asset and liability method. Deferred income
tax assets and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the currently enacted tax rates and laws. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.

Use of Estimates


                                       19
<PAGE>

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and fair value of financial instruments. Actual results could differ
from those estimates. Management believes the collection of notes receivable,
the value of our marketable securities and deferred taxes could materially be
affected by a material change of estimates.

Short-term investments

Short-term investments consist of 3,383,688 shares of IMSI common stock obtained
by the Company as part of the consideration received for the sale of Aladdin
Systems, Inc. (see Note 2). These investments are held for the purpose of
selling them in the near term and thus are classified as trading securities.
Trading securities are recorded at fair value on the balance sheet in current
assets, with the change in fair value during the period classified as unrealized
holding gains or losses in other income (expense) in the accompanying statement
of operations..

The following table summarizes our short-term investments as of December 31,
2004:

<TABLE>
<CAPTION>
                                                              Gross
                                        Gross               Unrealized      Estimated Fair
                 Cost             Unrealized Gains            Losses         Market Value
                 ----             ----------------            ------         ------------
<S>          <C>                   <C>                      <C>              <C>
IMSI stock   $4,533,833                   -                 ($913,287)        $3,620,546
</TABLE>

During January and February 2005, the Company sold 294,500 shares of IMSI stock
and received net proceeds of $310,390.

Cash and cash equivalents

Cash and cash equivalents include cash balances and highly liquid investments
with an initial maturity of three months or less. At December 31, 2004 the
Company had $239,530 in a working cash management account and $880,929 in an
institutional money market fund.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents.
The Company maintains its cash and cash equivalents with one financial
institution. At times our investments with this institution may be in excess of
the Federal Deposit Insurance Corporation (FDIC) insurance limits. At December
31, 2004, the Company had approximately $920,000 in excess of such limits.

Property and Equipment, Net

The Company's equipment is stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets, which is five
years.

Stock-Based Compensation


                                       20
<PAGE>

The Company accounts for stock-based awards to employees using the intrinsic
value method described in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and its related interpretations.
Accordingly, no compensation expense has been recognized in the accompanying
consolidated financial statements for stock-based awards to employees when the
exercise price of the award is equal to or greater than the quoted market price
of the Company's common stock on the date of the grant.

SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
amendment of FASB Statement No. 123" require disclosures as if the Company had
applied the fair value method to employee awards rather than the intrinsic value
method. The fair value of stock-based awards to employees is calculated through
the use of option pricing models, even though such models were developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which differ significantly from the Company's stock option
awards. These models also require subjective assumptions, including future stock
price volatility and expected time to exercise, which greatly affect the
calculated values. The Company's fair value calculations for awards from stock
option plans were made using the Black-Scholes option pricing model with the
following weighted average assumptions: expected term, ten years from the date
of grants in 2004 and 2003; stock price volatility, 127.74% in 2004 and 72% in
2003; risk free interest rate, 4.17% in 2004, and 4.02% in 2003; and no
dividends during the expected term.

If the computed fair values of the stock-based awards had been amortized to
expense over the vesting period of the awards, net income (loss) and net income
(loss) per share, basic and diluted, would have been as follows:

                                                    Year Ended December 31,
                                                     2004             2003
                                                --------------   --------------

Net income (loss), as reported                  $    5,995,219   $     (881,136)
Stock based compensation, net of taxes,
  determined under the intrinsic value method               --               --
Stock-based compensation, net of taxes,
   determined under the fair value method              595,895          264,004
                                                --------------   --------------
Pro forma net income (loss)                     $    5,339,324   $   (1,145,140)

Basic net earnings (loss) per share
   As reported                                  $         0.53   $        (0.07)
   Pro forma                                    $         0.48   $        (0.09)

Diluted net earnings (loss) per share
   As reported                                  $         0.51   $        (0.07)
   Pro forma                                    $         0.46   $        (0.09)

Earnings Per Share


                                       21
<PAGE>

Basic and diluted earnings per share is computed using the weighted average
number of common shares outstanding during the period. Potentially dilutive
securities consist of the incremental common shares issuable upon conversion of
convertible debt (using the if-converted method) and shares issuable upon the
exercise of stock options (using the treasury stock method). A total of 390,623
shares issuable upon the exercise of stock options have been included in the
diluted earnings per share calculation as of December 31, 2004. A total of
2,832,031 shares issuable upon the exercise of outstanding stock options as of
December 31, 2003 have been excluded from the diluted earnings per share
calculation, as the inclusion would be anti-dilutive. In addition, shares of the
Company's common stock issuable upon the conversion of convertible debt totaling
63,254 shares as of December 31, 2004 were included in the diluted earnings per
share calculation. Shares issuable upon the conversion of convertible debt
totaling 63,254 shares as of December 31, 2003 were excluded from the diluted
earnings per share calculation as the inclusion would be anti-dilutive.

Fair Value of Financial Instruments

The fair value of accounts payable and marketable securities approximates
carrying value due to the short-term nature of such instrument. The fair value
of the notes receivable - IMSI and notes receivable - legal settlement
approximate the carrying values at December 31, 2004 based on terms available
for similar instruments. The fair value of debt with related parties (see Note
4) is not determinable due to the terms of the debt and no comparable market for
such debt.

Long-lived Assets

The Company evaluates the recoverability of its long-lives assets whenever
circumstances or events indicate such assets might be impaired. The Company
would recognize an impairment charge in the event the net book value of such
assets exceeded the future undiscounted cash flows attributable to such assets.
As of December 31, 2004, management has determined that no such impairment
exists and therefore, no adjustments have been made to the carrying values of
long-lived assets. There can be no assurance, however, that market conditions or
demand for the Company's products or services will continue which could result
in impairment of long-lived assets in the future. The Company accounted for the
current year discontinued operations in accordance with SFAS 144 (see Note 2).

SFAS 144 requires companies to separately report discontinued operations and
extends that reporting requirement to a component of an entity that either has
been disposed of (by sale, abandonment or a distribution to owners) or is
classified as held for sale. Assets to be disposed of are reported at the lower
of the carrying amount or the estimated fair value less costs to sell.

Recent Accounting Pronouncements

In December 2004 the FASB issued SFAS No. 123R, a revision to SFAS 123
"Accounting for Stock Based Compensation" and supersedes APB Opinion No. 25
"Accounting for Stock Issued to Employees" and its related implementation
guidance. SFAS No. 123R establishes standards for the accounting for
transactions in which an entity exchanges instruments for goods or services. It
also addresses transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the entity's equity


                                       22
<PAGE>

instruments or that may be settled by the issuance of those equity instruments.
SFAS 123R established the accounting treatment for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS 123R
requires companies to recognize in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to
employees. SFAS 123R requires the Company to value the share-based compensation
based on the classification of the share-based award. If the share-based award
is to be classified as a liability, the Company must re-measure the award at
each balance sheet date until the award is settled. If the share-based award is
to be classified as equity, the Company will measure the value of the
share-based award on the date of grant but the award will not be re-measured at
each balance sheet date. SFAS 123R does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
SFAS 123 as originally issued and EITF Issue No. 96-18 "Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services". SFAS 123R is effective for small
business issuers as of December 15, 2005. All public companies must use either
the modified prospective or modified retrospective transition method. Under the
modified prospective method, awards that are granted, modified, or settled after
the date of adoption should be measured and accounted for in accordance with
SFAS 123R. Unvested equity classified awards that were granted prior to the
effective date should continue to be accounted for in accordance to SFAS 123
except that the amounts must be recognized in the statement of operations. Under
the modified retrospective method, the previously reported amounts are restated
(either to the beginning of the year of adoption or for all periods presented)
to reflect SFAS 123 amounts in the statement of operations. Management is in the
process of determining the effect SFAS 123R will have upon the Company's
financial position and statement of operations.

In March 2005, the FASB issued Staff Accounting Bulletin No. 107 ("SAB 107")
which provides additional guidance to the new stock option expensing provisions
under SFAS 123(R). SAB 107 acknowledges that fair value estimates cannot predict
actual future events and as long as the estimates are made in good faith, they
will not be subsequently questioned no matter what the actual outcome.
Historical volatility should be measured on an unweighted basis over a period
equal to or longer than the expected option term or contractual term, depending
on the option-pricing model that is used. Implied volatility is based on the
market prices of a company's traded options or other financial instruments with
option-like features, and is derived by entering the market price of the traded
option into a closed-form model and solving for the volatility input. SAB 107
provides additional guidance for companies when estimating an option's expected
term. In general, companies are not allowed to consider additional term
reduction and the option term cannot be shorter than the vesting period.
Companies are permitted to use historical stock option exercise experience to
estimate expected term if it represents the best estimate for future exercise
patterns. SAB 107 provides that companies should enhance MD&A disclosures
related to equity compensation subsequent to adoption of Statement 123(R). SAB
107 provided that companies should provide all disclosures required by Statement
123 (R) in the first 10-Q filed after adoption of the new rules.

In December 2004, the FASB issued Staff Position No. FAS 109-1 ("FAS 109-1"),
"Application of FASB Statement No. 109, "Accounting for Income Taxes," to the


                                       23
<PAGE>

Tax Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004 ("AJCA"). The AJCA introduces a special 9% tax deduction on
qualified production activities. Since the Company does not have any operations,
the Company will not be able to claim this tax benefit.

In December 2004 the FASB issued SFAS No. 153, "Exchanges of non-monetary Assets
- An Amendment of APB Opinion No. 29". The amendments made by SFAS No. 153 are
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. Further, the amendments
eliminate the narrow exception for non-monetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of non-monetary
assets that do not have "commercial substance." Previously, Opinion 29 required
that the accounting for an exchange of a productive asset for a similar
productive asset or an equivalent interest in the same or similar productive
asset should be based on the recorded amount of the asset relinquished. The
provisions in SFAS No. 153 are effective for non-monetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. Early application is
permitted and companies must apply the standard prospectively. Companies must
apply the standard prospectively. Management is in the process of determining
the effect, if any, SFAS No. 153 will have upon the Company's financial
position, results of operations or cash flows.

RECLASSIFICATIONS

Certain reclassifications have been made to prior year financial statements to
conform to current year presentation.

NOTE 2  - DISCONTINUED OPERATIONS

On April 16, 2004, the Company sold its Aladdin Enterprise Solutions, Inc.
("AES") subsidiary to AES Management Buyout Company, a Delaware corporation
("AMBO"), pursuant to a Stock Purchase Agreement. This was a related party
transaction because Mr. Kwok Li was previously a director of the Company and is
also the controlling shareholder of AMBO. The purchase price consisted of a
six-month secured note payable in the amount of $550,000, a thirty-month secured
note payable in the amount of $641,050, the receipt of 1,146,246 shares of AMBO
common stock and the return of 1,375,000 shares of common stock of the Company.
As management determined that the collectbility of the notes receivable was not
reasonably assured, the Company has not recorded the related notes and
therefore, did not include the notes receivable in the calculation of the gain
on the sale of the AES subsidiary for the year ended December 31, 2004. The
Company will recognize any additional gain on the sale of AES when and if, the
related notes receivable balances are collected. Both notes are secured by an
Intellectual Property Security Agreement covering the intellectual property
assets owned by AES and a Pledge Agreement covering all of the issued and
outstanding shares of AES. The Company also received the return of 1,375,000
shares of the Company's common stock previously issued to the original
shareholders of AES (prior to the acquisition of AES by the Company) and
1,146,246 newly issued and unregistered shares of AMBO common stock. The
1,375,000 shares of common stock were valued based on the market share price of


                                       24
<PAGE>

our common stock on April 16, 2004, which was $0.59 per share, for an aggregate
amount of approximately $812,000. Management is unable to determine the value of
the 1,146,246 AMBO shares received due to the lack of market for such shares and
the unavailability of financial information regarding AMBO. Accordingly,
management has valued these shares at zero. The Company, pursuant to the sale of
AES, recorded a before tax gain on the sale in the amount of $717,035 and has
classified all prior operations as discontinued operations.

As of December 31, 2004, although due, the Company had not received payment of
the $550,000 principal due and interest thereon under the six-month secured
promissory note and had not received the first payment due under the
thirty-month promissory note. AMBO has informed the Company that it has been
unable to secure the funding it initially expected and has requested extended
terms on both notes. The Company has yet to serve AMBO and AES with a notice of
default of the notes and the associated security agreements and the Company is
currently negotiating a temporary forbearance of the payments under both notes.

In February 2005, the Company received $10,000 from AMBO, which was applied to
the accrued interest on the notes. The Company is uncertain about collecting the
entire outstanding principle and interest due thereon, on the notes and no
assurance can be given that all or part such outstanding amounts will be
collected.

On April 19, 2004, the Company sold its, Aladdin Systems, Inc. ("Systems")
subsidiary to International Microcomputer Software, Inc. ("IMSI") pursuant to a
Stock Purchase Agreement. The consideration paid consisted of a combination of
cash in the amount of $1,500,000, subject to a 10% escrow in the amount of
$150,000; 2,317,881 newly issued shares of IMSI common stock and two three-year
secured convertible notes in the aggregate amount of $3,000,000 bearing interest
at 4%. The notes are convertible, by the Company at any time, into shares of
IMSI common stock at a conversion price of $3.00 per share and convertible by
IMSI, at the same conversion price, at any time after IMSI's common stock closes
higher than $4.00 per share for ten (10) consecutive trading days. The notes are
secured by a pledge of the Aladdin Systems' stock purchased by IMSI. The number
of shares of common stock received was equal to $3,500,000 divided by the
average of the closing "bid" price of IMSI's common stock for the twenty (20)
trading days prior to the closing date of April 19, 2004. Furthermore, pursuant
to the Stock Purchase Agreement, the Company may have been entitled to
additional cash earn-out payments, up to an aggregate of $2,000,000, based on
net revenues derived from Aladdin Systems for the three consecutive twelve-month
periods following the closing date of April 19, 2004.

On September 2, 2004, the Company entered into an Agreement with IMSI, which
modified certain provisions of the Stock Purchase Agreement and then on
September 10, 2004, the Company entered into an Amendment to the Modification
Agreement (collectively, the "Amended Modification Agreement"). Pursuant to the
terms of the Amended Modification Agreement, the following modifications were
made to the provisions of the Stock Purchase Agreement:

      1. The total amount of the Earn-Out Payments was fixed at a sum certain of
$1,700,000, payable in cash and IMSI common stock as follows:

      (a) The amount of $666,667 payable in cash, on or before June 2, 2005.


                                       25
<PAGE>

      (b) The value of $1,033,833 in newly issued restricted shares of IMSI
stock, no par value. Management estimated the fair value of the shares of common
stock to be $0.97 per share based on the closing bid price of IMSI common stock
on September 2, 2004, the date of execution of the Modification Agreement. The
Company received 1,065,807 shares of IMSI stock.

      Since pursuant to terms of the Amended Modification Agreement, the "earn
out" payment which was previously contingent was converted to a sum certain, the
Company recognized an additional gain on the sale of its Aladdin Systems
subsidiary to IMSI.

      On March 4, 2005 the Company entered into a Modification Agreement with
IMSI, which modified certain provisions of the September 2, 2004 and September
10, 2004 Modification Agreement (collectively, the "Amended Modification
Agreement"). Pursuant to the terms of the Amended Modification Agreement, the
following modifications were made to the provisions of the Stock Purchase
Agreement.

      (a) The payment of $666,667 will now be on or before August 15, 2005

      (b) IMSI will amend the SB-2 Stock Registration Statement to extend such
Registration Statement until the end of June, 2005.

The gain on the sale of each subsidiary is summarized in the table below:

                                   AES           Systems         Total
                                   ---           -------         -----

Carrying value                 $     60,029   $  1,275,512   $  1,335,541
Expenses associated with the
sale                                 34,186        172,560        206,746
Investment associated with
the sale                                 --        110,062        110,062
Consideration                       811,250      9,700,500     10,511,750

Gain                           $    717,035   $  8,142,366   $  8,859,401
Tax on Gain                         285,607      3,243,239      3,528,846
                               ------------   ------------   ------------
Gain, net of tax               $    431,428   $  4,899,127   $  5,330,555

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2004 consist of:

                                    Useful lives (years)

Computer equipment and other                    5                $15,000
Less accumulated depreciation                                    (3,231)
                                                           --------------
                                                                 $11,769
                                                           ==============


                                       26
<PAGE>

Depreciation expense for the year ended December 31, 2004 was $36,902, of which
$32,056 was part of discontinued operations. Depreciation expense for the year
ended December 31, 2003 was $70,192, of which $66,240 was part of discontinued
operations

NOTE 4  - RELATED PARTY NOTES

Notes Payable to Related Parties

  Notes payable to related parties include three notes totaling $110,062. The
  three notes are payable on demand. Interest for these notes is compounded
  daily and is payable monthly at an annual rate of 8.92% for two notes and 7%
  for one note. The related parties have the option to convert these notes into
  common stock at the lesser of $1.74 per share or at the lowest price shares of
  common stock are sold. At December 31, 2004, these three notes are convertible
  at $1.74 per share.

  On February 8, 2005, $5,000 of these demand notes was paid, and on March 31,
  2005, an additional $50,000 of these demand notes was paid. The balance on the
  demand notes is currently $55,062. None of the demand notes have been
  converted into shares of common stock. See Note 2 on related party note with
  AMBO.

NOTE 5 - INCOME TAXES

Income tax expense (benefit) for the years ended December 31, consists of:

                     2004            2003
                 ------------    ------------
Current
   Federal       $     13,000    $          0
   State                3,200           3,200
                 ------------    ------------
Total current    $     16,200    $      3,200

Deferred
    Federal        (1,486,447)             --
    State            (529,493)             --
                 ------------    ------------
Total deferred     (2,015,940)             --
                 ------------    ------------

                 $ (1,999,740)   $      3,200
                 ============    ============

Total income tax expense in 2004, including taxes associated with discontinued
operations, was $1,441,697, with $3,528,846 being allocated to the gain on sale
of the subsidiaries and a tax benefit of $87,409 being allocated to the loss on
discontinued operations in 2004.

The tax effect of temporary differences that give rise to significant portions
of net deferred tax assets at December 31, is presented below:


                                       27
<PAGE>

                                         2004            2003
                                     ------------    ------------

Net operating loss carry forwards    $     97,933    $    533,609
Tax credit carry forwards               1,017,442         940,536
Gain on sale of subsidiaries           (2,559,989)             --
Depreciation and amortization                  --        (216,934)
Other                                      19,117         139,418
                                     ------------    ------------
Net deferred tax (liability) asset     (1,425,497)      1,396,629
Less valuation allowance                       --      (1,396,629)
                                     ------------    ------------
                                     $ (1,425,497)   $         --
                                     ============    ============

The effective tax rate as a percentage of income before income taxes differs
from the statutory federal income tax rate (when applied to income before income
taxes) for the years ended December 31, as follows:

                                                     2004           2003
                                                 ----------     ----------
Statutory federal income tax (benefit) rate             (34%)          (34%)
Increase (decrease) resulting from:
Expenses not deductible for taxes                      (0.0%)          0.7%
State income taxes, net of federal tax benefit         (4.2%)         (5.8%)
Increase in valuation allowance                        18.8%          39.5%
                                                 ----------     ----------
Effective tax (benefit) rate                          (19.4%)          0.4%
                                                 ==========     ==========

As of December 31, 2004, the Company had net operating loss carryforwards of
approximately, $70,000 and $835,000 for federal and state income tax reporting
purposes, respectively, which begin expiring in 2014 and 2005, respectively.

In the event the Company were to experience a greater than 50% change in
ownership, as defined in Section 382 of the Internal Revenue Code, the
utilization of the Company's net operating loss carryforwards could be severely
restricted.


                                       28
<PAGE>

NOTE 6 - STOCKHOLDERS' EQUITY

In 2003, the Company granted Brad Peppard, a director, the option to purchase
36,000 shares of common stock as compensation for marketing work performed for
one of the Company's subsidiaries. Management estimated the fair value of the
shares of options to be $0.24 per share based on the market price of the
Company's common stock on November 21, 2003, the date of the grant. The Company
recorded a marketing expense of $8,640 for this transaction.

In 2004, the Company granted Harry Fox, a consultant, the option to purchase
100,000 shares of the Company's common stock, as compensation for legal
services. Management estimated the fair value of the options based on the
Black-Scholes option pricing model pursuant to SFAS 123 at $0.47 per option (see
Note 1). The Company recorded a legal expense of $47,230 for this transaction.

In 2004, the Company issued 122,327 shares of common stock to Baytree Capital
for investment banking services related to the sale of its Aladdin Systems
subsidiary. Management estimated the fair value of the shares of common stock to
be $0.60 based on the market price of our common stock on April 18, 2004, the
date of the issuance. The Company recorded an expense of $73,396 against the
gain on the sale of Aladdin Systems.

In 2004, the Company issued 41,667 shares of common stock to Powell Goldstein
for legal services related to the settlement of the AKS lawsuit. Management
estimated the fair value of the shares of common stock to be $0.60 based on the
market price of our common stock on June 16, 2004, the date of the grant. The
Company recorded a legal expense under general and administrative expenses in
the accompanying statements of operations of $25,000 for this transaction.

In 2004, the Company received back 1,375,000 shares of common stock as part of
the consideration for the sale of its AES subsidiary (see Note 2). Management
estimated the fair value of the shares of common stock to be $0.59 per share
based on the market share price of our common stock on April 15,2004, the date
of the agreement, for an aggregate amount of approximately $812,000. The shares
reacquired were immediately retired by the Company.

During 2004, the Company granted options to officers of the Company to purchase
1,020,054 with an exercise price of $0.62 per share. As these grants were to
replace previous options granted and cancelled in the current year, the Company
is accounting for such options based on the variable accounting method as
prescribed by APB 25 and FIN 44. Management estimated the fair value of the
stock to approximate the exercise price at December 31, 2004.

Stock Options

The Monterey Bay Tech option plan which was approved as the Aladdin Systems
Holdings, Inc. 1999 Stock Option Plan 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


                                       29
<PAGE>

remain available for granting at December 31, 2004. 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. See
note 1 for disclosure on assumptions used by management for the calculation of
the fair value of the options granted during the year ended December 31, 2004
and 2003.

During the twelve months ended December 31, 2004, the Company issued 1,182,354
options to employees, officers and directors with exercise prices ranging from
$0.40 to $0.62 per share and vesting immediately. The exercise price of each
option grant was estimated using the value of the closing price of our common
stock on the date of the grant.

Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
                                                        Shares       Weighted Average
                                                    Under options     Exercise Price
<S>                                                <C>               <C>
Balance at January 1, 2003                              2,884,222    $         1.31
Granted                                                   274,260              0.29
Cancelled                                                (326,451)             1.22
                                                   --------------    --------------
Outstanding and exercisable at December 31, 2003        2,832,031    $         1.22
Granted                                                 1,282,354              0.60
Cancelled                                              (2,256,632)             1.27
                                                   --------------    --------------
Outstanding and exercisable at December 31, 2004        1,857,753    $         0.74
                                                   ==============    ==============
</TABLE>

The following table summarizes information about stock options outstanding as of
December 31, 2004:

<TABLE>
<CAPTION>
                                            Weighted        Average                             Weighted
 Range of Exercise                          Average        Remaining                        Average Exercise
       Price               Number           Exercise      Contractual          Number            Price
                         Outstanding         Price        Term (Years)      Exercisable
-------------------- -------------------- ------------- ----------------- ----------------- -----------------
<C>                  <C>                  <C>           <C>               <C>               <C>
$0.23 - $0.44                    341,000         $0.36              6.79           341,000             $0.36
$0.60 - $0.75                  1,315,054         $0.63              5.96         1,315,054             $0.63
$1.07 - $1.54                     79,599         $1.26              3.92            79,599             $1.26
$1.74 - $4.00                    122,100         $2.67              3.39           122,100             $2.67
                     -------------------- -------------                   ----------------- -----------------
                               1,857,753         $0.74                           1,857,753             $0.74
                     ==================== =============                   ================= =================
</TABLE>


                                       30
<PAGE>

The weighted average fair value of options granted to employees was $0.39 and
$0.19 for 2004 and 2003, respectively.

NOTE 7 - RELATED PARTY TRANSACTIONS

Paul Goodman, a director of the Company, has provided legal services to the
Company since its inception and is currently the Company's corporate attorney.
The fees paid to Mr. Goodman were $112,668 and $47,000 for 2004 and 2003,
respectively.

See Note 4 for related party notes.

NOTE 8 - LITIGATION

In December 2003, Aladdin Knowledge Systems, Inc. ("AKS"), filed a suit against
the Company in the Federal District Court for the Northern District of Illinois,
alleging, among other things, that the Company's use of the "Aladdin" trademark
infringed the rights of AKS and seeking a preliminary injunction to prevent the
Company from using the "Aladdin" name in connection with the Company's
SpamCatcher product. In June 2004, the Company settled the suit with AKS for a
total of $550,000 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 its Aladdin Systems subsidiary. Pursuant to our Stock Purchase
Agreement with IMSI (see Note 2), IMSI was entitled to receive 50% of such
amount after deducting expenses associated with defending the AKS litigation.
The total expenses incurred in defending the AKS litigation were $599,000 and
therefore no money was due to IMSI. The Company changed its name to Monterey Bay
Tech, Inc. as part of the settlement. In June 2004, the Company received
$210,000 from AKS and in October 2004, the Company received the second
installment of $210,000. The balance due to the Company as of December 31, 2004
is $130,000 and is due in May 2007.

NOTE 9 - EARNINGS (LOSS) PER SHARE

The following is a reconciliation of the number of shares used in the
calculation of basic earnings per share and diluted earnings per share for the
years ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                           2004           2003
                                                       ------------   ------------
<S>                                                    <C>            <C>
Net income (loss)                                      $  5,995,219   ($   881,136)

Weighted average number of common shares outstanding
                                                         11,355,787     12,230,272
Incremental shares from the assumed exercise of
dilutive stock options                                      390,623             --
Shares issuable upon the conversion of debt                  63,254             --
                                                       ------------   ------------
Dilutive potential common shares                         11,809,664     12,230,272
</TABLE>



                                       31
<PAGE>

NOTE 10 - SUBSEQUENT EVENTS

On February 17, 2005, the Company executed a Stock Purchase Agreement with
SpaceLogic and its stockholders, pursuant to which the Company will purchase all
of the issued and outstanding capital stock of SpaceLogic from its stockholders
(the "SpaceLogic Transaction"). Pursuant to the Stock Purchase Agreement, we
will acquire all of the issued and outstanding common stock of SpaceLogic for a
total of 33,343,286 newly issued shares of the Company's common stock. As of the
closing of the SpaceLogic Transaction, SpaceLogic will become a wholly-owned
subsidiary of the Company and the current stockholders of SpaceLogic, as a group
will become the majority stockholders of the Company. In addition, at the
Closing, the Company will also acquire the 15% interest in SecureLogic, Ltd.,
which is not already owned by SpaceLogic, in exchange for an additional
3,520,472 newly issued shares of the Company's common stock. In total, at the
Closing, the Company will exchange a total of 36,863,758 newly issued shares of
common stock to acquire SpaceLogic and its SecureLogic subsidiary.

In connection with the closing of the Transaction, the Company will amend its
Articles of Incorporation to change the name of the Company to "SecureLogic
Corp.", to increase the number of shares of common stock the Company is
authorized to issue to 100,000,000, and to appoint four (4) new members to the
Company's Board of Directors, to replace the current directors who will resign
upon the closing of the SpaceLogic Transaction (collectively, the "Additional
Actions").

The Company's Board of Directors, on February 17, 2005, approved the SpaceLogic
Transaction and the Additional Actions. In addition to approval by the Board of
Directors, the Additional Actions also require approval by a majority of the
voting power of all outstanding shares of the Company's Common Stock. Although
approval of the SpaceLogic Transaction by a majority of the outstanding shares
of the Company's Common Stock was not required, the Board of Directors
nevertheless voted to seek such approval. In order to accelerate Stockholder
approval and to reduce the costs of obtaining Stockholder approval, the Board of
Directors elected to obtain such approval by seeking the written consent of the
holders of a majority interest of our Common Stock (the "Consent").

On or about March 22, 2005, Stockholders who own in the aggregate 7,966,459
shares of our Common Stock, representing approximately 72.3% of our outstanding
shares, gave their written Consent to the SpaceLogic Transaction and each of the
Additional Actions.

On April 5, 2005, the Company filed a Definitive Information Statement with the
Securities and Exchange Commission Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 which contains detailed information regarding SpaceLogic,
its business and the terms and conditions of the SpaceLogic Transaction

The closing of the SpaceLogic Transaction is subject to certain conditions
including stockholder and Board of Director approvals by both companies and
regulatory compliance, and is expected to occur on or about April 30, 2005.
However, no assurance can be given that conditions to closing of all parties to
the Stock Purchase Agreement will be met and that the closing of the SpaceLogic
Transaction will occur.


                                       32
<PAGE>

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

Effective January 31, 2005, the Board of Directors of the Company approved the
engagement of Stonefield Josephson as its new independent auditors for the
fiscal year ended December 31, 2004. The Company did not consult with Stonefield
Josephson 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.

Grant Thornton audited the Company's financial statements for fiscal years ended
December 31, 2003 and 2002. Grant Thornton's reports on our financial statements
for the past two fiscal years did not contain an adverse opinion or a disclaimer
of opinion nor were they qualified or modified as to uncertainty, audit scope or
accounting principle. During the Company's two most recently completed fiscal
years through January 31, 2005, the date of dismissal of Grant Thornton as the
Company's independent accountant, there have been no disagreements with Grant
Thornton 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 Grant Thornton would have caused them to make
reference thereto in their report on the financial statements for such years.
There were no events otherwise reportable under Item 304(a)(1)(iv) of Regulation
S-B.

ITEM 8A.  CONTROLS AND PROCEDURES

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.
Their evaluation considered the reduction in management and financial personnel
after the sale of our operating subsidiaries in April 2004 and the corresponding
reduction in procedures and controls. During this process, senior management
identified a material weakness in our internal controls in that there has been
no segregation of accounting duties since the sale of our operating businesses
in April 2004. Specifically, due to a lack of internal resources, our part time
Chief Accounting Officer has made all accounting entries, reviewed the entries
and reported on the results. However, due to the Company having limited staff
and a part time Chief Accounting Officer, this led to significant adjustments at
year end to the accounting records and financial reports. Management has
determined that this is a material weakness in the Company's internal controls.
Once this weakness was identified, management took corrective action in the form
of revising our internal controls to require a second member of senior
management review, on a monthly basis, all financial statements in detail.

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


                                       33
<PAGE>

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.


                                       34
<PAGE>

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:

<TABLE>
<CAPTION>
Name                            Age     Position
----                            ---     --------
<S>                             <C>     <C>
Jonathan Kahn                   47      Chairman, Chief Executive Officer, President, Treasurer and Director
Darryl Lovato                   38      Director
Alexandra Gonzalez              38      Chief Financial Officer and Secretary
Brad Peppard (1)(2)             49      Director
Paul Goodman (1)(2)             45      Director
David Schargel (1)(2)           40      Director
</TABLE>

(1) Member of the Compensation Committee
(2) Member of the Audit Committee

Brad Peppard a member of our audit committee, serves as the audit committee's
financial expert as that term is defined in Section 407 of the Sarbannes-Oxley
Act.

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

JONATHAN KAHN is currently Chairman, President and Chief Executive Officer of
the Company. Mr. Kahn is one of the original founders of Aladdin Systems and has
served as a Director since 1988. Mr. Kahn has extensive expertise in software
industry sales, marketing, business development and licensing arrangements. Mr.
Kahn is also President is Allume Systems, Inc. Mr. Kahn is a graduate of the
University of Rhode Island with a B.A. in Economics.

DARRYL LOVATO is one of the co-founders of the Company. Mr. Lovato was the Chief
Technology Officer of Aladdin Systems since 1997 and was responsible for leading
the Aladdin's research on new technologies and products. Mr. Lovato has served
as a Director since the company's founding in 1988. Prior to co-founding
Aladdin, Mr. Lovato worked at Apple Computer as a Senior Software Engineer. Mr.
Lovato has over twenty years of software programming and development experience.
Mr. Lovato is currently CTO of Allume Systems, Inc.


                                       35
<PAGE>

ALEXANDRA GONZALEZ became Secretary of Company in February 2002 and has been the
Chief Financial Officer of the Company since 2002. Prior to becoming CFO, she
served as Vice President of Finance, Controller and in other financial positions
at the Company since 1991. She has over 14 years of financial experience in the
software industry. Ms. Gonzalez received a BA in Mathematical Economics from
Colgate University. Ms. Gonzalez is the division controller for Allume Systems,
Inc.

BRAD PEPPARD is President of LimeTree Productions, Inc. a technology and direct
marketing consulting firm. Prior to that, Mr. Peppard was president of
CinemaScore Online, a leading Internet provider of movie information. From 1996
through 1998 he served as Vice President of Marketing at Aladdin Systems, and in
1998, Mr. Peppard became a Director of Aladdin. Prior to joining Aladdin, Mr.
Peppard was responsible for worldwide marketing at Quarterdeck Office Systems,
during which time the company grew from $20 million to $120 million in revenue.
He was also Vice President of Marketing at Software Publishing Corporation, as
well as President and founder of SoftMail Corporation, a leading direct
marketing agency, and president of Monogram Software. Mr. Peppard has an MBA
from Stanford University and a B.A. from Amherst College. Mr. Peppard is on the
board of Rainmaker Systems, Inc.

DAVID SCHARGEL is the Chairman and President of Portland Walking Tours, a
leading sightseeing tour company, which he founded in 2001. Mr. Schargel was the
founder of Aportis Technologies Corp., an award-winning Palm and Pocket PC
handheld software company, which sold its product line in 2002. He is one of the
co-founders of Aladdin and served as its President from 1988 to 1994. Mr.
Schargel has served as a Director since 1988. Prior to co-founding Aladdin, he
was Vice President at Olduvai Corporation, a publisher of software for the
Macintosh computer and also had served as Technical Editor at MacUser Magazine.
Mr. Schargel has extensive experience in software product management, customer
service, and marketing.

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.

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, 2004 all Section 16(a) filing requirements
applicable to the Company's officers, directors and greater than ten percent
shareholders were complied with.


                                       36
<PAGE>

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.

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, acountability for
adherence to the code. A copy of the Code of Ethics can be found as Exhibit 99
to our Form 10-KSB.

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.


                                       37
<PAGE>

                         SUMMARY COMPENSATION TABLE (1)

<TABLE>
<CAPTION>
                                                                                                      Long term compensation
                                                                              Number of options        Number of securities
Name and position             Year          Salary            Bonus               cancelled           Underlying options (2)
-----------------             ----          ------            -----               ---------           ----------------------
<S>                           <C>           <C>             <C>              <C>                      <C>
Jonathan Kahn, Chariman,                                                                                               311,997
President and CEO
                                2002          $135,000                  -
                                2003           180,000             20,000                                               10,530
                                2004            58,846            210,000                   390,934                    470,934

Alexandra Gonzalez, CFO
                                2002            84,900                  -                                               25,000


                                2003           125,000              1,000                                                    -
                                2004           $60,865            $45,500                   153.186                    153,186
</TABLE>

(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, 2004

<TABLE>
<CAPTION>
                                      Number of
                                     Securities         % of Total          Exercise
                                 Underlying Options    Options Granted     Price Per
Name                    Year             (1)           to Employees (2)   Share ($/SH)      Expiration Date (3)
----                    ----             ---           ----------------   ------------      -------------------
<S>                     <C>            <C>             <C>                <C>               <C>
Jonathan Kahn           2004           470,934               40%              $ .62               5/14/09
Darryl Lovato           2004           395,934               33%              $ .62               5/14/09
Alexandra Gonzalez
                        2004           153,186               13%              $ .62               5/14/14
</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 1,182,354 shares of our common stock in 2004.


                                       38
<PAGE>

(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.

OPTION EXERCISES AND YEAR-END OPTION VALUES

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, 2004. None of these officers exercised options to purchase
common stock in 2004.


                                       39
<PAGE>

            AGGREGATE OPTION EXERCISES AND YEAR END OPTION VALUES (1)

<TABLE>
<CAPTION>
                                                            Number of Unexercised           Value of Unexercised In-the- Money
                                                             Options At year End                     Options at Year End
                                                             -------------------                     -------------------
                                    Number of
                                     shares
                                   acquired on
Name              Year              exercise          Exercisable         Unexercisable       Exercisable        Unexercisable
<S>               <C>              <C>                <C>                 <C>                 <C>                <C>
Jonathan Kahn     2004                                                             -                                      -
                                        -                470,934                                $61,221
Darryl Lovato     2004                                                             -                                      -
                                        -                395,934                                $51,471
Alexandra
Gonzalez          2004                  -                153,186                   -            $19,914                   -
</TABLE>

(1) Based on a per share fair market value of our common stock equal to $0.75
per share, the trading price market value of our common stock on December 31,
2004.

COMPENSATION OF DIRECTORS

In 2004, Paul Goodman, Brad Peppard and David Schargel received options to
purchase up to 25,000 shares of Common Stock with an exercise price of $0.40, in
exchange for the board services. In 2004, Paul Goodman, Brad Peppard and David
Schargel also received options to purchase up to 25,000 shares of Common Stock
with an exercise price of $0.62, in exchange for the board services. All of
these options 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, 2004.


                                       40
<PAGE>

<TABLE>
<CAPTION>
                                                    Amount and Nature of      Percent of
                                                   Beneficial Ownership (1)     Class
Name of Beneficial Owner
<S>                                                             <C>                  <C>

EXECUTIVE OFFICERS AND DIRECTORS

Jonathan Kahn (2)                                               2,225,254            20.2%
Darryl Lovato (3)                                               2,113,191            19.2%
David Schargel (4)                                              1,621,789            14.7%
Brad Peppard (5)                                                  188,400             1.7%
Paul Goodman (6)                                                  151,000             1.4%
Alexandra Gonzalez (7)                                            153,186             1.4%
                                                             ------------    ------------
All directors and executive officers
As a group (6 persons)                                          6,452,820            58.6%

OTHER 5% STOCKHOLDERS

Benna Lovato (8)                                                1,686,009            15.3%
Michael Gardner                                                 1,350,765           12.44
Marco Gonzalez                                                    697,791             6.3%
                                                             ------------    ------------
                                                                3,421,127              31%

All directors, executive officers and 5% stockholders as a
group (9 persons)                                               9,873,947            89.6%
</TABLE>

      (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.

      (2) Includes 470,934 shares of Common Stock subject to options that are
exercisable at December 31, 2004.

      (3) Includes 395,934 shares of Common Stock subject to options that are
exercisable at December 31, 2004.

      (4) Includes 100,000 shares of Common Stock subject to options that are
exercisable at December 31, 2004.

      (5) Includes 188,400 shares of Common Stock subject to options that are
exercisable at December 31, 2004.

      (6) Includes 150,000 shares of Common Stock subject to options that are
exercisable at December 31, 2004.

      (7) Includes 153,186 shares of Common Stock subject to options that are
exercisable at December 31, 2004.

      (8) Includes 50,000 shares of Common Stock subject to options that are
exercisable at December 31, 2004.


                                       41
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 2004, Paul Goodman, Brad Peppard and David Schargel received options to
purchase up to 25,000 shares of Common Stock with an exercise price of $0.40, in
exchange for the board services. In 2004, Paul Goodman, Brad Peppard and David
Schargel also received options to purchase up to 25,000 shares of Common Stock
with an exercise price of $0.62, in exchange for the board services. These
options were immediately vested.

In 2004, the Company sold its Aladdin Enterprise Solutions, Inc. subsidiary to
AES Management Buyout Company, a Delaware corporation ("AMBO"). One of the
current principal owners of AMBO, Kwok Lee, was previously the Chairman of the
Board of the Company in 2003.

ITEM 1.: 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 Monterey Bay Tech, Inc. and
the Independent Auditors' Report issued thereon, are incorporated by reference
in Part II, Item 7:

Report of Independent Registered Public Accountants Stonefield Josephson, Inc.
Report of Independent Registered Public Accounting Firm Grant Thorton, 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:

<TABLE>
<CAPTION>
<S>                         <C>
--------------------------------------------------------------------------------------------------------------------------------
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.*
--------------------------------------------------------------------------------------------------------------------------------
21.1                        Subsidiaries of Registrant
--------------------------------------------------------------------------------------------------------------------------------
23.1                        Consent of Grant Thornton LLP
--------------------------------------------------------------------------------------------------------------------------------
23.2                        Consent of Stonefield Josephson
--------------------------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------------------------------------


                                       42
<PAGE>

--------------------------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees and services billed by Grant
Thornton LLP and Stonefield Josephson for the fiscal years ended December 31,
2004 and 2003:

                                          2004         2003
                                       ----------   ----------
Grant Thornton LLP
   Audit fees                          $   38,040   $  145,550
   Audit-Related Fees                       4,440        7,302
   Tax Fees                                10,890       14,039
                                       ----------   ----------
Total fees from Grant Thornton         $   54,370   $  166,891

Stonefield  Josephson LLP
   Audit fees                          $   90,000   $       --
   Audit-Related Fees                          --           --
   Tax Fees                                    --           --
                                       ----------   ----------
Total fees from Stonefield Josephson   $   90,000   $       --

Total fees                             $  144,370   $  166,891
                                       ==========   ==========


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.

MONTEREY BAY TECH, INC.
(Registrant)

By /s/ Jonathan Kahn
   ------------------------------
 (Jonathan Kahn, Chief Executive Officer, President and Director)

By /s/ Alexandra Gonzalez
   ------------------------------
 (Alexandra Gonzalez, Chief Financial Officer, Secretary)


                                       43
<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.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Signature                                Title                                  Date
----------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                    <C>
----------------------------------------------------------------------------------------------------------------------
/s/ Jonathan Kahn                        Chief Executive Officer, President     4/21/05
-------------------------                and Director
(Jonathan Kahn)

----------------------------------------------------------------------------------------------------------------------
/s/ Darryl Lovato                        Chief Technology Officer and Director  4/21/05
-------------------------
(Darryl Lovato)

----------------------------------------------------------------------------------------------------------------------
/s/ Brad Peppard                         Director                               4/21/05
-------------------------
(Brad Peppard)
----------------------------------------------------------------------------------------------------------------------
/s/ David Schargel                       Director                               4/21/05
-------------------------
David Schargel

----------------------------------------------------------------------------------------------------------------------
/s/ Paul Goodman                         Director                               4/21/05
-------------------------
Paul Goodman

----------------------------------------------------------------------------------------------------------------------
</TABLE>


EXHIBIT INDEX

<TABLE>
<CAPTION>
<S>                         <C>
------------------------------------------------------------------------------------------------------------------------------
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.*
------------------------------------------------------------------------------------------------------------------------------
21.1                        Subsidiaries of Registrant
------------------------------------------------------------------------------------------------------------------------------
23.1                        Consent of Grant Thornton LLP
------------------------------------------------------------------------------------------------------------------------------
23.2                        Consent of Stonefield Josephson
------------------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------------------


                                       44
<PAGE>

------------------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       45