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

                                   FORM 10-KSB

(Mark One)
[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 For the fiscal year ended December 31, 2005

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the transition period from               to
                                        --------------   --------------

                         Commission file number: 0-49763

                               CIROND CORPORATION
                 (Name of small business issuer in its charter)

                    NEVADA                             88-0469593
        (State or other jurisdiction                (I.R.S. Employer
      of incorporation or organization)            Identification No.)

             100 ALBRIGHT WAY, SUITE D, LOS GATOS, CALIFORNIA 95032
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (408) 370-1797

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                         COMMON STOCK, $0.001 PAR VALUE
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ] No [X]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

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

State issuer's revenues for its most recent fiscal year: $120,642

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: $981,316.40 AS OF JULY 31, 2006

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 96,110,000 AS OF JULY 31, 2006

Transitional Small Business Disclosure Format (Check one):  Yes    ; No  X
                                                               ----    ----


<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

BUSINESS DEVELOPMENT

         We were originally incorporated in the State of Nevada on April 6, 2000
to engage in the business of providing Internet-based email-to-mail printing and
delivery services. We established the eXmailit.com website which had not yet
commenced providing an Internet-based email-to-mail service. The network, which
was still under construction, was intended to consist of a consumer-based,
software product that would have a number of strategically located international
distribution centers enabling users to send email as standard mail. We did not
generate any revenue and therefore only sustained losses.

         As a result of our lack of profitability and the receipt of numerous
inquires from entities seeking to merge with us, our operational focus expanded
beyond our email-to-mail service to include reviewing potential merger or
acquisition candidates.

         On November 25, 2003, we acquired all of the issued and outstanding
capital stock of Cirond Networks Inc., a Nevada corporation ("CNI"), in exchange
for 17,000,000 shares of our common stock. As a result of this share exchange,
the parent company of CNI owned approximately 51.2% of our issued and
outstanding shares and CNI became our wholly-owned subsidiary. We changed our
name to Cirond Corporation as of October 14, 2003.

         CNI was founded in March 2001 to develop technologies designed to
enhance the performance and security of wireless networking technologies, with
an initial specific focus on 802.11b Wireless Local Area Network ("WLAN")
technology. A WLAN is one in which a mobile user can connect to a local area
network ("LAN") through a wireless (radio) connection. The 802.11b standard for
WLANs - often called "WiFi" - is part of the 802.11 series of WLAN standards
from the Institute of Electrical and Electronics Engineers. CNI conducts its
research and development activities through its subsidiary, Cirond Networks
(Canada) Inc., a British Columbia corporation.

         CNI's initial product set, which was announced in late 2002 and shipped
in 2003, included a wireless network management and security solution, known as
Winc Manager, and a pair of wireless connectivity utilities, known as WiNc and
pocketWiNc.

         In late 2003, we announced a new family of products dedicated primarily
to the goal of securing wired networks against the threat of unauthorized
wireless devices (such as wireless-equipped laptop computers and wireless access
points). These products were announced under the AirPatrol name and included
AirPatrol Enterprise(TM) and AirPatrol Mobile(TM). AirPatrol Enterprise(TM) is a
network security product aimed at securing an organization's network against the
wireless threat around the clock and capable of being repurposed as a wireless
network management solution at such time as the customer implements a wireless
network. AirPatrol Mobile(TM) is a software-only solution that allows customers
to detect and locate unauthorized wireless devices and access points without the
use of any specialized hardware. CNI also developed and introduced a line of
products under the AirSafe name.

         In December 2004, we obtained financing through the sale of shares of
our convertible preferred stock. However, the proceeds of the financing were not
sufficient to fund the marketing of these products. Due to lack of sales
revenues and external financing, we were forced to reduce our personnel. On
January 19, 2006, CNI entered into a Source Code Licensing Agreement with Air
Patrol Corporation, a Nevada corporation controlled by one of our shareholders.
We granted AirPatrol Corporation a worldwide license for the WiNc, AirPatrol and
AirSafe software products and for the associated trademarks and tradenames. We
agreed not to grant any licenses to any third parties so long as we receive at
least $250,000 from AirPatrol Corporation by January 19, 2007. In consideration
for the licenses, AirPatrol Corporation has agreed to pay us a royalty equal to
20% of the gross sales of the licensed software products that utilize the
Windows 2000, Windows XP, or Windows Mobile 4.0 operating systems that are
generated during the first year of the agreement. The percentage declines with
each year, going to 15% during the second year, 10% during the third year, 8%
during the fourth year, and 5% thereafter. The royalty is 5% for the sales of
licensed software products that utilize operating systems other than Windows
2000, Windows


                                       2
<PAGE>

XP, or Windows Mobile 4.0. AirPatrol Corporation paid us $50,000 upon execution
of the agreement as an advance against this royalty obligation. The agreement
continues until terminated (1) by either party in the event of breach of the
agreement, or (2) by either party in the event of the other party's bankruptcy,
liquidation, insolvency, or assignment for the benefit of creditors.

         On April 4, 2006, we entered into a Foreclosure Sale Agreement (the
"Agreement") among Sand Hill Finance, LLC ("Sand Hill"), the Company, ServGate
Technologies, Inc. ("ServGate"), and BSGL, LLC ("BSGL"), pursuant to which the
Company agreed to acquire certain of the personal property assets of ServGate,
consisting primarily of intellectual property, and assume certain of ServGate's
liabilities from Sand Hill and BSGL, who were secured senior lenders holding
those assets as collateral on existing loans that were in default. ServGate had
developed unified threat management software and had more than 100 employees in
the United States, Canada, and China. The Company also issued 9,000,000 shares
of the Company's Common Stock to BSGL in accordance with the terms of the
Agreement. The acquisition was made pursuant to a private foreclosure sale under
Section 9610 of the California Uniform Commercial Code. On April 10, 2006, the
Company completed its acquisition of the assets and the assumption of the
specified liabilities of ServGate pursuant to the terms of the Agreement. While
we purchased the intellectual property rights (patents, domain names, and
product trade marks) to the ServGate products, we did not acquire ServGate's
distributor and importer agreements or sales force. Roughly half of ServGate's
employees are likely to continue with us.

         We plan to continue as an Intellectual Property licensing and services
company under the new name of "Amarium Technologies" and use the ServGate assets
to establish a Unified Threat Management network security division, called
"EdgeForce". The unified threat management (UTM) market has been defined as the
combination of firewall/VPN and minimally antivirus software. UTM represents
significant market adoption of consolidated security functionality that
introduces ease-of-use, convenience, performance while reducing cost and time
associated with implementation and maintenance. It also results in significantly
tighter security at the perimeter and multiple edges of the network, minimizing
the probability of failure by point solutions defending against blended threat
attacks.

         UTM is the third shift in network consolidation (firewall/Virtual
Private Networks was the first) constituting a major roll up of gateway
functionality. We believe that UTM represents comprehensive unique security,
ease of management and total cost of ownership advantages. We perceive that the
UTM Market is growing rapidly and point solution providers are being left behind
(firewall/Virtual Private Networks, Internet Provider Security, Secure Sockets
Layer Virtual Private Networks, etc.). Further, we believe that the market is
ripe for consolidation of additional gateway functionality and services, and
only EdgeForce is uniquely poised to take advantage of third party, best of
breed application integration.

CUSTOMERS

         During the fiscal year ended December 31, 2004, a source code licensing
agreement with Computer Associates generated 83% of our revenues. During the
fiscal year ended December 31, 2005, we were not dependent on any key customers.

COMPETITION

         The UTM market is characterized by intense competition. There are
several companies, both public and private, offering UTM solutions. Our
solutions cover a broad range of competitors. These competitors include
companies such as Watchguard, McAfee, Cisco, Sonic Wall, and Fortinet. Most of
these firms have products that are proficient as firewalls or anti-virus
software, acting independently of each other. We believe that our most
significant competitive advantage is that our product adds core networking
functionality (load balancing, for example) while continuing to attract and
integrate third party best of breed applications in antivirus and other future
threat protection areas.

         The UTM market is now rapidly adding any functionality that makes sense
at the gateway: spyware protection, IPS, policy enforcement, switching (for
small office/branch office), compression, acceleration, SSL


                                       3
<PAGE>

VPN, and even antispam. Accordingly, we believe that UTM represents by far the
quickest and largest growing gateway sector.

         We believe that we provide proven performance, intellectual property
coverage, and unmatchable customer choice as well as strong differentiation. We
are moving into the execution and tactical phase of the market, which is about
selecting the proper relationships, executing on a go-to-market strategy and
continuing to lock in third party, best of breed, proven and trusted security
brands.

         We offer customers proven performance, per appliance pricing (no per
seat), best of breed technology at prices competitive to Open Source-based
products.

         Many, if not most of our competitors, however, have greater financial
resources and have been able to market their products more extensively. Some of
our competitors have existing customer bases for non-competitive products, which
provide them with the advantage of greater market recognition.

RESEARCH AND DEVELOPMENT

         During the fiscal years ended December 31, 2005, 2004, and 2003, we
spent $216,692, $576,894, and $404,886, respectively, on research and
development activities.

GOVERNMENT REGULATION

         We do not anticipate that any government regulations will significantly
affect our business.

EMPLOYEES

         As of June 26, 2006, we employed a total of 65 persons, of which 63
were full-time and 2 were consultants. None of our employees is covered by a
collective bargaining agreement.


ITEM 2.  DESCRIPTION OF PROPERTY.

         Our principal offices are located at 100 Albright Way, Suite D, Los
Gatos, California. The rent on the lease is $9,216 per month, rising to $9,635
per month in June 2007. We lease approximately 8,378 square feet under a lease
that expires May 31, 2008.

         We lease approximately 3,373 square feet of office space at 4185 Still
Creek Dr, Suite A101, Burnaby, BC, Canada at a cost of approximately $5,115 Cdn
per month, under a lease that expires September 30, 2006.


ITEM 3.  LEGAL PROCEEDINGS.

         In March 2006, Andrew Lessman initiated a proceeding in the District
Court for Clark County, Nevada, against us, CNI, Cirond Networks (Canada) Inc.,
AirPatrol Corporation, Nicholas Miller, and Kevin O'Neill in connection with a
subscription transaction between us and Mr. Lessman. In April 2004, we received
$2,000,000 in funds from Mr. Lessman in connection with a private placement
offering pursuant to an irrevocable subscription agreement. Mr. Lessman later
requested that his investment be rescinded and, without waiving any of our
rights we may have under the subscription agreement, we returned $1,500,000 to
Mr. Lessman of the $2,000,000 received. In connection with the private
placement, we paid a $100,000 finder's fee. We recovered the finder's fee and
returned it to Mr. Lessman as well. It has been our intent to return the
$400,000 balance of the investment only when Mr. Lessman enters into a mutual
settlement agreement acceptable to us. Even though we have offered to return the
remaining $400,000 to Mr. Lessman if he executes a mutual settlement agreement,
he has refused to execute the settlement agreement. The lawsuit that was filed
is an action to recover the remaining $400,000 plus interest, compensatory
damages in an amount according to proof, special and consequential damages in an
amount according to proof, punitive damages, costs and expenses of the suit, and
attorney's fees. The $400,000 has been reflected as


                                       4
<PAGE>

share subscriptions payable on our balance sheets at December 31, 2005 and 2004.
We intend to defend this action and have filed a responsive pleading. No hearing
or trial dates have been scheduled.


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

         None.





























                                       5
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

         Our common stock was listed on the over-the-counter bulletin board
("OTCBB") from September 3, 2002 (originally under the symbol "EXMA") until
December 21, 2005. From October 16, 2003 to December 21, 2005, it was listed
under the symbol "CROO." The stock has been quoted on the Pink Sheets since
December 21, 2005. The following table sets forth the range of high and low bid
quotations for each fiscal quarter for the last two fiscal years and the current
fiscal year. These quotations reflect inter-dealer prices without retail
mark-up, mark-down, or commissions and may not necessarily represent actual
transactions.

         FISCAL QUARTER ENDING                      HIGH BID          LOW BID

         March 31, 2004..........................   $   1.50         $   0.65
         June 30, 2004...........................   $   1.50         $   1.26
         September 30, 2004......................   $   1.60         $   0.85
         December 31, 2004.......................   $   1.38         $   0.45
         March 31, 2005..........................   $   0.50         $   0.23
         June 30, 2005...........................   $   0.38         $   0.09
         September 30, 2005......................   $   0.20         $   0.03
         December 31, 2005.......................   $   0.04         $   0.01
         March 31, 2006..........................   $   0.05         $   0.01
         June 30, 2006...........................   $   0.07         $   0.03

         On July 31, 2006, the closing bid price for the common stock on the
Pink Sheets was $.02.

HOLDERS

         As of June 30, 2006, there were 173 record holders of our common stock.

DIVIDENDS

         We do not anticipate paying dividends on our common stock at any time
in the foreseeable future. Our board of directors plans to retain earnings for
the development and expansion of our business. Our directors also plan to
regularly review our dividend policy. Any future determination as to the payment
of dividends will be at the discretion of our directors and will depend on a
number of factors, including future earnings, capital requirements, financial
condition and other factors as the board may deem relevant. We cannot pay any
dividends on our common stock if any dividends due on our outstanding Series B
preferred stock are unpaid. Dividends of $100,000 and $2,466 were accrued for
the fiscal year ended December 31, 2005 and for the period from December 22,
2004 to December 31, 2004, in connection with our Series B preferred stock
issued on December 22, 2004.

SALES OF UNREGISTERED SECURITIES

         There were no sales of unregistered equity securities made during the
quarter ended December 31, 2005.





                                       6

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

OVERVIEW


         As CNI is a software development company, it earns revenues through
license sales of its products, all of which utilize the proprietary technology
developed by CNI. Development of the technology requires a significant outlay of
cash before a viable product is developed that utilizes the technology. After
development of a product, even more cash is required to market the product
before any revenues are realized. Accordingly, the challenge that faces many
software development companies is being able to obtain enough cash to fund
research and development and marketing expenses and sustain the company until
revenues are generated. Such funds are needed fairly quickly after products are
developed, as the environment in which the products are used is constantly
changing. Companies face the risk of discovering that their products do not meet
the needs of the potential customers or are technologically outdated after a
marketing campaign is launched.

         CNI entered into the above transaction with a publicly-held company to
improve its ability to obtain funding for research and development of its
products and marketing efforts. Management believed that it would be easier to
obtain funding if investors identified an "exit strategy" via the public
marketplace. By entering into the non-exclusive source code licensing agreement
with Computer Associates International, Inc. in January 2004, management
believed that CNI had achieved validation of its product by a well-recognized
firm in the computer industry. During 2004, we raised $323,500 through the
issuance of our common shares for cash and $1,815,000 through the sale of
convertible preferred shares. In addition, we were able to pay for the
consulting services of Securities Trading Services Inc. with common shares. We
used these funds for operations, which included research and development
expenses of $576,894 and marketing efforts.

         Believing that we had developed a viable suite of products dedicated to
the goal of securing wired networks against the threat of unauthorized wireless
devices that was ready for the marketplace, management focused its efforts and
resources on marketing products through several channels during 2005. Our
efforts did not result in significant sales revenues and we were unable to
obtain external sources of cash to sustain these marketing efforts. Accordingly,
in January 2006, we entered into a Source Code License Agreement and granted an
exclusive license to AirPatrol Corporation to our software products.

         In April 2006, the Company entered into a Foreclosure Sale Agreement
(the "Agreement") among Sand Hill Finance, LLC ("Sand Hill"), the Company,
ServGate Technologies, Inc. ("ServGate"), and BSGL, LLC ("BSGL"), pursuant to
which the Company agreed to acquire certain of the personal property assets of
ServGate, consisting primarily of intellectual property, and assume certain of
ServGate's liabilities from Sand Hill and BSGL, who were secured senior lenders
holding those assets as collateral on existing loans that were in default.
ServGate had developed unified threat management software and had more than 100
employees in the United States, Canada, and China. The Company also issued
9,000,000 shares of the Company's Common Stock to BSGL in accordance with the
terms of the Agreement. The acquisition was made pursuant to a private
foreclosure sale under Section 9610 of the California Uniform Commercial Code.
On April 10, 2006, the Company completed its acquisition of the assets and the
assumption of the specified liabilities of ServGate pursuant to the terms of the
Agreement. We plan to continue as an Intellectual Property licensing and
services company under the new name of "Amarium Technologies" and use the
ServGate assets to establish a Unified Threat Management network security
division.

GOING CONCERN

         The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America, which contemplate continuation of our company as a going concern. We
had net losses of $1,442,245 and $1,437,439 and negative cash flows from
operations of $1,306,447 and $1,155,226 for the years ended December 31, 2005
and 2004, respectively. At December 31, 2005, we had an accumulated deficit of
$5,141,259. These factors raise substantial doubt as to our ability to continue
as a going concern.

         The application of the going concern concept is dependent upon our
ability to receive continued financial support from our creditors, stockholders
and external investors and attaining profitable operations through the sale



                                       7
<PAGE>

of our software. These consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern and, therefore, be required
to realize our assets and discharge our liabilities in other than the normal
course of operations. Management plans to obtain equity and debt financing from
external investors and to actively market our network security applications.

         Management believes the plan described above will be sufficient to meet
our liabilities and commitments as they become payable over the next twelve
months. There can be no assurance that management's plan will be successful.
Failure to obtain the support of additional external investors to finance the
development and marketing of our network security applications will cause us to
curtail operations and impair our ability to continue as a going concern.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

         Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosures
of contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to the valuation of accounts receivable and
inventories, the impairment of long-lived assets, any potential losses from
pending litigation and deferred tax assets or liabilities. We base our estimates
on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions; however, we believe that
our estimates, including those for the above-described items, are reasonable.

         REVENUE RECOGNITION. In accordance with the provisions of the American
Institute of Certified Public Accountant's Statement of Position 97-2 "Software
Revenue Recognition," revenue from software license sales, both directly and
through value-added resellers, is recognized once delivery has occurred,
evidence of an arrangement exists, the fee is fixed and determined and
collection of the fee is probable, provided there are no significant vendor
obligations remaining. We estimate allowances for returns arising from warranty
provisions based on historical experience. For multiple element arrangements,
where Vendor Specific Objective Evidence ("VSOE") of fair value is available for
all elements, the contract value is allocated to each element proportionately
based upon relative VSOE of fair value and revenue is recognized separately for
each element. Where VSOE of fair value is available for all undelivered
elements, the residual method is used to value the delivered elements. Where
VSOE of fair value is not available for an undelivered element all revenue for
the arrangement is deferred until the earlier of the point at which VSOE does
exist or all elements of the arrangement have been delivered, unless the
undelivered elements are post contract customer support arrangements, in which
case the arrangement revenue is recognized ratably, or services, in which case
the arrangement revenue is recognized as the services are provided. Periodically
we sell to value-added resellers ("VAR") under terms consistent with those
applied to other customers. We do not offer price protection or rights of return
to VARs and consideration terms and sales are not dependent on the option of the
resellers.

RESULTS OF OPERATIONS

         FISCAL YEAR ENDED DECEMBER 31, 2005 COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 2004

         Revenues from operations decreased from $955,931 for the year ended
December 31, 2004 to $120,642 for the year ended December 31, 2005. Revenue from
the Computer Associates source code licensing agreement described above, which
closed in the first quarter of 2004, accounted for approximately 83% of revenues
for the 2004 fiscal year. All of the payments due to us under this agreement
were paid at the time of the contract. We have recorded a portion of the fees
received as revenue each month for the 12 months from January 21, 2004 to
January 20, 2005 relating to the support fees earned in connection with this
agreement. We also received revenue in 2004 from licensing of our Winc Manager,
Winc, pocketWinc and recently introduced AirPatrol Mobile, AirPatrol Sentinel
and AirPatrol Enterprise software products. In 2005, our AirPatrol products
generated approximately 55% of our revenues, WiNc products generated
approximately 40% of our revenues, and the remainder was generated by



                                       8
<PAGE>

the Computer Associates licensing agreement. In 2005, our WiNc products revenues
suffered an approximate $74,000 decrease, while our AirPatrol products revenues
increased by less than $25,000.

         During fiscal 2005, our expenses decreased over the prior year as we
had to cut back on marketing efforts, reducing advertising and promotion
expenses from $220,715 in 2004 to $102,836 in 2005. In addition, we decreased
expenditures for research and development from $576,894 in 2004 to $216,692 in
2005. Consulting fees decreased from $868,883 in 2004 to $744,244 in 2005, as
members of our management team left the company during 2005.

         Despite the decrease in expenses, our net loss for the year ended
December 31, 2005 was $1,442,245 compared to a net loss of $1,437,439 for the
year ended December 31, 2004. The increase in the net loss is primarily a result
of the 87% decrease in revenues compared to the year ended December 31, 2004.

         Dividends of $2,466 were accrued in 2004 for our redeemable,
convertible preferred stock issued on December 22, 2004. Dividends of $100,000
were accrued in 2005. Accretion of the discount to the redeemable, convertible
preferred stock, with respect to a beneficial conversion option and warrants
issued in connection with preferred stock, of $63,100 as well as amortization of
deferred financing costs of $4,400 were recorded for the year. A deemed
distribution of $390,000 was recorded to reflect the fair value of changes made
to warrant and conversion price features on the preferred shares.

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2005, we had cash of $1,272 and a working capital
deficiency of $924,333, as compared to cash of $1,308,086 and a working capital
surplus of $497,618 at December 31, 2004.

         We had receivables totaling $9,541 at December 31, 2005 related to Air
Patrol and Winc product revenues.. Receivables of $14,883 at December 31, 2004
consisted of sales made on Esellerate and Handango websites in December 2004 and
paid to us in January 2005, as well as refundable taxes from the Canadian
government. The entire amounts receivable at December 31, 2004 and 2005 were
collected in the first quarters of 2005and 2006.

         Prepaid expenses consisted of prepaid rent.

         Property plant and equipment consisted of hardware equipment purchased
from independent suppliers in North America for the development of our products.

         Consulting fees payable consisted of payables owed to two of our former
officers, Nicholas Miller and Mitchell Burton.

         Deferred revenue at December 31, 2004 included support revenue in
connection with the Source Code Licensing Agreement, which was recognized each
month for the 12 months from January 21, 2004 to January 20, 2005.

         Accounts payable increased from December 31, 2004 to December 31, 2005
as a result of our cash shortage.

         In April 2004, we received $2,000,000 in funds from a private investor,
Andrew Lessman, in connection with a private placement offering pursuant to an
irrevocable subscription agreement. During the quarter ended June 30, 2004, Mr.
Lessman requested that his investment be rescinded and, without waiving any of
our rights we may have against him under the subscription agreement, we returned
$1,500,000 to Mr. Lessman of the $2,000,000 received. In connection with the
private placement, we paid a $100,000 finder's fee. During the quarter ended
June 30, 2004, we recovered the finder's fee, which we returned to Mr. Lessman
as well. It is our intent to return the $400,000 balance of the investment only
when Mr. Lessman enters into a mutual settlement agreement acceptable to us.
Even though we have offered to return the remaining $400,000 to Mr. Lessman if
he executes a mutual settlement agreement, he has refused to execute the
settlement agreement. Mr. Lessman has initiated an action to recover the
remaining $400,000. Although we have returned $1,600,000 of the $2,000,000
invested, we have not admitted to any facts or circumstances that would support
a legal right to rescind the investment and we intend to


                                       9
<PAGE>

vigorously defend the legal action on that basis. The $400,000 is reflected as
share subscriptions payable at December 31, 2005 and 2004.

         During June 2004, we began a private placement offering of 2,000,000
shares of common stock at a price of $0.50 per share for an aggregate of
$1,000,000. We concluded the offering in September 2004, selling a total of
700,000 shares for net cash proceeds of $323,500.

         In December 2004, we entered into securities purchase agreements with
several accredited investors pursuant to which we agreed to sell, and the
investors agreed to purchase, 2,000 shares of Series B 5% Redeemable Convertible
Preferred Stock, warrants to purchase 2,325,584 shares of common stock, and
Additional Investment Rights for a total of $2,000,000. The warrants are
exercisable for five years at $0.55 per share. The preferred stock may be
converted in shares of common stock at a price of $0.43 per share. The
Additional Investment Rights entitle the investors to buy up to $4,000,000 of
preferred stock and warrants on the same terms for period of six months
following the effective date of the registration statement we agreed to file. We
disclosed, as a subsequent event, the receipt of common share subscriptions
totaling $250,000 in our September 30, 2004 consolidated interim financial
statements. The subscriber agreed to apply its $250,000 investment to purchase
250 shares of preferred stock in connection with this financing.

         In connection with the subscription, we paid Ascendiant Securities, LLC
a cash commission of $160,000 and a non-accountable expense allowance of
$25,000, and issued Ascendiant warrants for the purchase of up to 1,674,419
shares of common stock at $0.55 per share. The warrants are exercisable for a
five-year period commencing from the date on which the right to exercise the
warrants vested. As at December 31, 2005, 372,093 Ascendiant warrants were
vested. Ascendiant will be entitled to further vested warrants as the investors
exercise their warrants and the Additional Investment Right securities. The
warrants contain piggyback registration rights and a net exercise provision. In
August 2005, the Company and the investors amended the terms of the Securities
Purchase Agreements including adjusting the conversion price of the redeemable,
convertible preferred stock to $0.25 per share, adjusting the exercise price of
the investors' warrants to $0.30 per share and terminating the Additional
Investment Rights. The Company has recorded a deemed distribution to the
preferred shareholders due to the changes in the conversion price and warrant
exercise price of $390,000, equal to the excess of the fair value of these
rights immediately prior to and subsequent to the amendment. Fair value was
estimated using the Black Scholes option pricing model using the expected period
to conversion or exercise, a volatility factor of 152%, a risk-free interest
rate of 4.13% and no assumed dividend rate.

         In May 2006, and as disclosed in the subsequent events notation to the
financial statements, we offered all of the holders of the preferred stock the
right to convert their shares into shares of common stock at a price of $0.01
per share. Holders representing 77.5% of the preferred stock agreed to the
conversion. The conversion requires the issuance of 155,000,000 shares. We
issued 50,000,000 and are proposing to implement a 1-for-65 reverse split of our
issued and outstanding common stock and increase our authorized common stock to
500,000,000 shares. We believe that this proposal will make available a
sufficient number of shares for our anticipated private placements of equity to
fund operations. The accounting effects of this proposal have not been reflected
in the December 31, 2005 financial statements.

PLAN OF OPERATION

         We believe we do not have sufficient funds to cover our operating
overhead for the next twelve months. Accordingly, we estimate that we will need
cash from one or more external sources of approximately $10 million over the
next twelve months. We intend to conduct additional financings to raise funds
from private investors. However, there are no assurances that we will be able to
complete any such financings.

         In connection with the acquisition of the ServGate assets described
above, we obtained a secured bridge loan for $1,700,000 from Sand Hill and
executed promissory notes to Sand Hill and BSGL in the principal amounts of
$2,100,000 and $2,500,000, respectively. All of these obligations are secured by
a security interest in the purchased assets and the $2,100,000 promissory note
to Sand Hill is also guaranteed by certain management of ServGate and Cirond up
to $1,915,000.


                                       10
<PAGE>

         The $1,700,000 bridge loan accrues interest at 10% per annum, requires
quarterly interest payments beginning July 1, 2006, and is due October 1, 2006.
If revenues generated by the Company through June 30, 2006 are less than
$1,500,000, then Sand Hill will have the option to require payment of the loan
in full on the day that is 90 days after June 30, 2006. To June 30, 2006, the
Company has not made all scheduled principal and interest payments and has not
generated $1,500,000 in revenues. Sand Hill has not taken action to demand
repayment of the loan as a result of the events. Proceeds of the bridge loans
were used for payments to Sand Hill to reduce the $2,100,000 principal balance
of its note and accrued liabilities that the Company had assumed.

         The note for $2,100,000 made payable to Sand Hill, as amended, is due
December 31, 2006, accrues interest at 18% per annum, and requires interest
payments on July 1, 2006, October 1, 2006 and December 31, 2006, as well as
mandatory principal payments as follows: $150,000 by April 7, 2006, $100,000 by
May 15, 2006, $500,000 by June 30, 2006, $500,000 by September 30, 2006, 25% of
the proceeds from any OEM agreements, and 15% of the proceeds of any sale of
equity over $3,000,000 by December 31, 2006. To June 30, 2006, the Company has
not made all scheduled principal and interest payments. Sand Hill has not taken
action to demand repayment of the note as a result of the events.

         The note for $2,500,000 made payable to BSGL is due December 31, 2007,
accrues interest at the prime rate plus 2% per annum and requires mandatory
principal payments as follows: 10% of the net proceeds of an anticipated
issuance by the Company of securities or convertible debt for an aggregate
issuance price of not less than $5,000,000 (the "PIPE Transaction"), $375,000 on
December 31, 2006, $375,000 on March 31, 2007, $375,000 on June 30, 2007,
$375,000 on September 30, 2007, and the remaining outstanding principal balance
on December 31, 2007. If the operating income generated by the ServGate products
equals or exceeds $2,000,000 for the fiscal year ended December 31, 2006, then
the note is to be paid by January 31, 2007. Interest is to be paid upon maturity
by issuing common stock at a per share price equal to the lesser of (i) the PIPE
Transaction Price and (ii) the current market price on the maturity date.

         BSGL can convert the principal amount of the note into shares of the
Company's common stock at any time. BSGL must convert the $1,000,000 of the
principal amount of the note if the revenue from the ServGate products does not
equal or exceed $5,000,000 for the one-year period commencing April 4, 2006. In
either case, conversion would be at a per share price equal to the lesser of (i)
the PIPE Transaction Price and (ii) the current market price on the conversion
date.

OFF BALANCE SHEET ARRANGEMENTS

         We do not have any material off balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

FORWARD-LOOKING STATEMENTS

         Certain statements in this Annual Report on Form 10-KSB, as well as
statements made by us in periodic press releases, oral statements made by our
officials to analysts and shareholders in the course of presentations about us,
constitute "forward-looking statements." Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors that may cause our
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by the forward
looking statements. There are many factors that could cause these
forward-looking statements to be incorrect including, but not limited to, the
following:

     o   our ability to generate desired technologies;
     o   the lack of liquidity of our common stock;
     o   the risks associated with technology companies;
     o   our ability to find and retain skilled personnel;
     o   availability of capital;
     o   the strength and financial resources of our competitors; and
     o   general economic conditions.



                                       11
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.

         See pages beginning with page F-1.


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

         None.


ITEM 8A. CONTROLS AND PROCEDURES.

         As required by SEC rules, we have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures at the end of the
period covered by this report. This evaluation was carried out under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer. Based on this
evaluation, these officers have concluded that the design and operation of our
disclosure controls and procedures are effective. There were no changes in our
internal control over financial reporting or in other factors that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

         Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.


ITEM 8B. OTHER INFORMATION.

         None.









                                       12
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

         Our executive officers and directors are:

         NAME                               AGE     POSITION
         ----                               ---     --------
         Francis E. Wilde                    53     CEO, President, and Director
         E. Joseph Vitetta, Jr.              47     Vice President of Sales
         J. Donald Herzog                    39     Director

         Our shareholders elect our directors annually and our board of
directors appoints our officers annually. Vacancies in our board are filled by
the board itself. Set forth below are brief descriptions of the recent
employment and business experience of our executive officers and directors.

         FRANCIS E. WILDE. Mr. Wilde has been our President and Chief Executive
Officer and a director since May 2006. He is a veteran of eight start-up
companies and has over 25 years of sales, marketing and business development
experience in the computer industry. He has held executive management positions
at IBM, Dell Computer Corporation, Memorex Telex Corporation, Wicat Systems,
Collaborative Technologies Corporation, Summagraphics, Academic Systems
Corporation and Ravisent Technologies Corporation. He has over 18 years P&L
experience and has led or been a team member of companies that raised over $320
million in equity financing and completed 22 merger and acquisition
transactions.

         Mr. Wilde was most recently the CEO and President of Tarantella, Inc.,
an enterprise software company delivering secure remote access products to
Fortune 1000 companies worldwide. He served in these positions from December
2003 until Tarantella's acquisition by Sun Microsystems in July 2005. From
February 2002 to October 2003, Mr. Wilde served as chairman of the board of
Digital Stream USA, Inc., a privately-held software company. He served as
president and CEO of Ravisent Technologies, Inc., a DVD software company, from
August 1997 to August 2001, and as a director from August 1997 to January 2002.
Mr. Wilde received a Bachelor's degree in business administration from Seton
Hall University. He served on active duty in the United States Army between 1973
and 1979 and retired from the United States Army Reserve with the rank of Major
in 1994.

         E. JOSEPH VITETTA, JR. Mr. Vitetta has been our Vice President of Sales
since June 2006. Mr. Vitetta was the Vice President, Corporate Development of
Tarantella, Inc. from December 2003 until Tarantella's acquisition by Sun
Microsystems in July 2005. He served as Executive Vice President, Corporate
Development at Starlight Digital Technologies, LLC from February 2003 until
December 2003. Mr. Vitetta served as Vice President, Corporate Development at
Axeda Systems, Inc. (formerly known as Ravisent Technologies, Inc. and Quadrant
International), from September 1998 until February 2003.

         J. DONALD HERZOG. Mr. Herzog has been a director since May 2006, and
has been an investment professional with Bluegrass Growth Fund since June 2004.
From December 2000 to August 2003, he was with the hedge fund, Zimmer Lucas
Partners. Prior to that, he was with Odyssey Capital. Mr. Herzog is a former
naval officer, holds a B.S. in electrical engineering from Drexel University,
and holds an MBA from Carnegie Mellon University.

CONFLICTS OF INTEREST

         Members of our management are associated with other firms involved in a
range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of our company.
While the officers and directors are engaged in other business activities, we
anticipate that such activities will not interfere in any significant fashion
with the affairs of our business, in terms of having adequate time to devote to
the business of the company.


                                       13
<PAGE>

         Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies, which may be formed for
the purpose of engaging in business activities similar to us. Accordingly,
additional direct conflicts of interest may arise in the future with respect to
such individuals acting on behalf of us or other entities. Moreover, additional
conflicts of interest may arise with respect to opportunities which come to the
attention of such individuals in the performance of their duties or otherwise.
Currently, we do not have a right of first refusal pertaining to opportunities
that come to their attention and may relate to our business operations.

         Our officers and directors are, so long as they are our officers or
directors, subject to the restriction that all opportunities contemplated by our
plan of operation which come to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to us and the companies that they are affiliated with on an equal
basis. A breach of this requirement will be a breach of the fiduciary duties of
the officer or director. If we or the companies with which the officers and
directors are affiliated both desire to take advantage of an opportunity, then
said officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to such
transactions.

CODE OF ETHICS

         We have adopted a code of ethics that applies to our principal
executive officers, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of the code was
filed as an exhibit to our annual report on Form 10-KSB for the fiscal year
ended December 31, 2004.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires our
officers, directors, and persons who beneficially own more than 10% of our
common stock to file reports of securities ownership and changes in such
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10% beneficial owners are also required by rules
promulgated by the SEC to furnish us with copies of all Section 16(a) forms they
file.

         Based solely upon a review of the copies of such forms furnished to us,
or written representations that no Form 5 filings were required, we believe that
during the fiscal year ended December 31, 2005, there was compliance with all
Section 16(a) filing requirements applicable to our current officers, directors
and greater than 10% beneficial owners. No beneficial ownership reports were
filed by the former officers, directors or greater than 10% beneficial owners.


ITEM 10. EXECUTIVE COMPENSATION.

         The following table sets forth information the remuneration of our
chief executive officers and our four most highly compensated executive officers
who earned in excess of $100,000 per annum during any part of our last three
fiscal years:

<TABLE>
                           SUMMARY COMPENSATION TABLE
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------

                                                                               LONG TERM COMPENSATION
                                                                      ---------------------------------------
                                 ANNUAL COMPENSATION                             AWARDS             PAYOUTS
-------------------------------------------------------------------------------------------------------------------------
                                                              OTHER     RESTRICTED   SECURITIES
    NAME AND                                                 ANNUAL        STOCK     UNDERLYING      LTIP       ALL OTHER
    PRINCIPAL           FISCAL                              COMPENSA-    AWARD(S)     OPTIONS/      PAYOUTS     COMPENSA-
    POSITION             YEAR    SALARY ($)    BONUS ($)     TION($)        ($)       SARS (#)        ($)        TION($)
-------------------------------------------------------------------------------------------------------------------------
<S>                      <C>     <C>              <C>         <C>          <C>           <C>          <C>        <C>
Nicholas Miller,         2005     $180,000        -0-          -0-          -0-          -0-          -0-          -0-
CEO (1)<F1> (2)<F2>      2004     $180,000        -0-          -0-          -0-          -0-          -0-          -0-
                         2003     $120,000        -0-          -0-          -0-          -0-          -0-          -0-
-------------------------------------------------------------------------------------------------------------------------


                                       14
<PAGE>

<CAPTION>
-------------------------------------------------------------------------------------------------------------------------

                                                                               LONG TERM COMPENSATION
                                                                      ---------------------------------------
                                 ANNUAL COMPENSATION                             AWARDS             PAYOUTS
-------------------------------------------------------------------------------------------------------------------------
                                                              OTHER     RESTRICTED   SECURITIES
    NAME AND                                                 ANNUAL        STOCK     UNDERLYING      LTIP       ALL OTHER
    PRINCIPAL           FISCAL                              COMPENSA-    AWARD(S)     OPTIONS/      PAYOUTS     COMPENSA-
    POSITION             YEAR    SALARY ($)    BONUS ($)     TION($)        ($)       SARS (#)        ($)        TION($)
-------------------------------------------------------------------------------------------------------------------------
<S>                      <C>     <C>              <C>         <C>          <C>           <C>          <C>        <C>
Mitchell Burton,         2005    $52,500 Cdn      -0-          -0-          -0-          -0-          -0-          -0-
      Chief              2004     $120,000        -0-          -0-          -0-          -0-          -0-          -0-
   Technol-ogy           2003     $120,000        -0-          -0-          -0-          -0-          -0-          -0-
Officer (2)<F2>
(3)<F3>

-------------------------------------------------------------------------------------------------------------------------
 M. Kevin Ryan,          2003        -0-          -0-          -0-          -0-          -0-          -0-          -0-
  President (4)<F4>
-------------------------------------------------------------------------------------------------------------------------
------------------
<FN>
(1)<F1>  Mr. Miller became our CEO in November 2003.
(2)<F2>  Amounts incurred as consulting fees pursuant to our contracts with
         Amber Tiger Holding Corp. and Headline Technologies Ltd. are listed as
         salary.
(3)<F3>  Mr. Burton was CNI's Chief Technology Officer from November 2001 to
         July 2005.
(4)<F4>  Mr. Ryan was President from our inception in 2000 to November 2003.
</FN>
</TABLE>

         For fiscal 2005, we paid Nicholas Miller, through Amber Tiger Holding
Corp., $15,000 per month and Mitchell Burton, through Headline Technologies
Ltd., $10,000 per month.

COMPENSATION OF DIRECTORS

         Nicholas Miller is not compensated separately for his service as a
director. Beginning in January 2005, we began paying each of our non-officer
directors $1,500 for their attendance at board of director meetings and $1,000
for their attendance at committee meetings.

STOCK OPTION PLANS

         By written consent dated September 20, 2004, our Board of Directors
adopted the 2004 Stock Option Plan. Shareholder adoption of the Plan was
required by September 20, 2005. Such adoption did not occur.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

         The following table sets forth certain information, as of June 30,
2006, concerning shares of common stock of the Company, the only class of its
securities that are issued and outstanding, held by (1) each stockholder known
by the Company to own beneficially more than five percent of the common stock,
(2) each director of the Company, (3) each executive officer of the Company, and
(4) all directors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                          AMOUNT AND                              PERCENT OF CLASS
                                                     NATURE OF BENEFICIAL   PERCENT OF CLASS     BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNERS (1)<F1>          OWNERSHIP (2)<F2>       FOR VOTE (3)<F3>          (4)<F4>
-------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                      <C>                 <C>
Bluegrass Growth Fund LP (5)<F5>                          6,451,612                6.7%                 9.9%
122 East 42nd Street Suite 2606
New York, NY 10168
-------------------------------------------------------------------------------------------------------------------
BSGL LLC                                                  9,000,000                9.4%                 4.5%
M Brownrigg
1524 Columbus Ave
Burlington, CA 94010
-------------------------------------------------------------------------------------------------------------------
Meadowbrook Opportunity Fund LLC                          8,064,516                8.4%                 12.4%
520 Lake Cook Road Suite 690
Deerfield, IL 60015
-------------------------------------------------------------------------------------------------------------------


                                       15
<PAGE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                          AMOUNT AND                              PERCENT OF CLASS
                                                     NATURE OF BENEFICIAL   PERCENT OF CLASS     BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNERS (1)<F1>          OWNERSHIP (2)<F2>       FOR VOTE (3)<F3>          (4)<F4>
-------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                      <C>                 <C>
Nicholas R. Miller                                        7,397,018                7.7%                 3.7%
4812 Marine Drive
West Vancouver, BC V7W 292
Canada
-------------------------------------------------------------------------------------------------------------------
Penn Footwear                                             4,838,710                 5%                  7.5%
Line & Grove Streets
PO BOX 87
Nanticoke, PA 18634
-------------------------------------------------------------------------------------------------------------------
Bradley N. Rotter Self Employed Pension Plan and          8,064,516                8.4%                 12.4%
Trust
850 Cornett Avenue Suite 6
San Francisco, CA 94131
-------------------------------------------------------------------------------------------------------------------
Seaside Holdings Inc.                                     6,451,614                6.7%                 9.9%
4185 Still Creek Drive Suite B101
Burnaby, BC V5C 6C9
Canada
-------------------------------------------------------------------------------------------------------------------
Stonestreet Limited Partnership                           8,064,516                8.4%                 12.4%
33 Prince Arthur Avenue
Toronto, ON M5R 1B2
Canada
-------------------------------------------------------------------------------------------------------------------
Whalehaven Capital Fund LTD                               4,838,710                 5%                  7.5%
PO BOX HM 2257
Hamilton, AMJX
Bermuda
-------------------------------------------------------------------------------------------------------------------
Francis E. Wilde                                             -0-                    0%                   0%
-------------------------------------------------------------------------------------------------------------------
J. Donald Herzog                                            2,000                   0%                   0%
-------------------------------------------------------------------------------------------------------------------
Officers and directors as a group (2 persons)               2,000                   0%                   0%
-------------------------------------------------------------------------------------------------------------------
------------------
<FN>
(1)<F1>  To our knowledge, except as set forth in the footnotes to this table
         and subject to applicable community property laws, each person named in
         the table has sole voting and investment power with respect to the
         shares set forth opposite such person's name.

(2)<F2>  Reflects shares owned at June 30, 2006. Does include shares to be
         issued upon shareholder approval of a reverse stock split and increase
         in authorized common shares.

(3)<F3>  This column is based on 96,110,000 shares of Common Stock outstanding
         as of June 30, 2006.

(4)<F4>  This column is based on 201,110,000 shares of Common Stock beneficially
         owned after the issuance of 105,000,000 additional pre-split shares
         pursuant to the conversion of Preferred Stock agreed to on May 9, 2006.

(5)<F5>  Includes the beneficially owned shares under the name Bluegrass Growth
         Fund LTD.
</FN>
</TABLE>

CHANGES IN CONTROL

         There are no agreements known to management that may result in a change
of control of our company, other than as disclosed above.

EQUITY COMPENSATION PLANS

         As of December 31, 2005, we did not have any equity compensation plans.


                                       16
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Other than as disclosed below, none of our present directors, officers
or principal shareholders, nor any family member of the foregoing, nor, to the
best of our information and belief, any of our former directors, senior officers
or principal shareholders, nor any family member of such former directors,
officers or principal shareholders, has or had any material interest, direct or
indirect, in any transaction, or in any proposed transaction which has
materially affected or will materially affect us.

         NICHOLAS MILLER. We, through CNI, have entered into a Management
Advisory Services Agreement with Amber Tiger Holdings Corp., a company owned and
controlled by Nicholas Miller, the president and sole director of CNI, and an
officer, director and principal, beneficial shareholder of Cirond Corporation.
The agreement provides for the provision of all business management and
executive services to us by Nicholas Miller in connection with his role as our
president and CEO. The agreement is for a term of one year and automatically
renews annually unless terminated by us or Amber Tiger. At the time CNI entered
into the agreement with Amber Tiger, Nicholas Miller was the sole director.
Accordingly, it was not a negotiated contract. For the years ended December 31,
2005 and 2004, compensation under that agreement was $15,000 per month. For the
years ended December 31, 2005 and 2004, we incurred consulting fees to Amber
Tiger in the amount of $180,000 per year. At December 31, 2005, $75,000 of these
consulting fees were included in consulting fees payable.

         From August 2005 through December 2005, Amber Tiger advanced a total of
CDN$27,500 (US$23,478) to our Canadian subsidiary for working capital. The
advances accrue interest at 2% per month.

         In connection with the purchase of the Foreclosure Assets transaction,
we granted Nicholas Miller a warrant to purchase 15,000,000 shares of common
stock at $0.01 per share that was execisable through April 11, 2013. On July 20,
2006, Mr. Miller voluntarily relinquished his rights to the warrant.

         MITCHELL BURTON. We, through CNI, have entered into a Management
Advisory Services Agreement with Headline Technologies Ltd., a company owned and
controlled by Mitchell Burton, the former chief technology officer of CNI and
chief technology officer of Cirond Corporation. The agreement provides for the
provision of all business management and executive services to us by Mitchell
Burton in connection with his role as our chief technology officer. The
agreement is for a term of one year and automatically renews annually unless
terminated by us or Headline Technologies. At the time CNI entered into the
agreement with Amber Tiger, Nicholas Miller was the sole director. For the years
ended December 31, 2005 and 2004, we incurred consulting fees to Headline
Technologies in the amounts of $52,500 Cdn and $120,000. At December 31, 2005,
$70,000 of these consulting fees were included in consulting fees payable.

         SEASIDE HOLDINGS INC. At December 31, 2004, we were indebted to Seaside
Holdings Inc., a company in which Mr. Miller serves as an officer and director,
in the amount of $111,575. Seaside Holdings Inc. was the former parent company
of CNI. The debt relates to inter-company obligations from CNI to Seaside
Holdings Inc. which were incurred prior to our acquisition of CNI. The debt was
unsecured, non-interest bearing and had no fixed terms of repayment. In the
third quarter of 2005, we assigned a $100,000 receivable as full payment for the
indebtedness. Since the amount of the indebtedness at the date of repayment was
$111,389, we realized a gain on debt settlement of $11,389.

         FUTURE TRANSACTIONS. All future affiliated transactions will be made or
entered into on terms that are no less favorable to us than those that can be
obtained from any unaffiliated third party. A majority of the independent,
disinterested members of our board of directors will approve future affiliated
transactions.

         We believe that of the transactions described above have been on terms
as favorable to us as could have been obtained from unaffiliated third parties
as a result of arm's length negotiations.



                                       17
<PAGE>


ITEM 13. EXHIBITS.

--------------------------------------------------------------------------------
  REGULATION
  S-B NUMBER                            EXHIBIT
--------------------------------------------------------------------------------
     2.1         Foreclosure Sale Agreement made April 4, 2006 among Sand Hill
                 Finance, LLC, Cirond Corporation, ServGate Technologies, Inc.,
                 and BSGL, LLC (1)
--------------------------------------------------------------------------------
     2.2         First Amendment to Foreclosure Sale Agreement
--------------------------------------------------------------------------------
     3.1         Articles of Incorporation, as amended (2)
--------------------------------------------------------------------------------
     3.2         Bylaws, as amended (3)
--------------------------------------------------------------------------------
     4.1         Certificate of Designation of Series B 5% Convertible Preferred
                 Stock (4)
--------------------------------------------------------------------------------
    10.1         Management Advisory Services Agreement with Headline
                 Technologies Ltd. dated February 1, 2002 (5)
--------------------------------------------------------------------------------
    10.2         Management Advisory Services Agreement with Amber Tiger
                 Holdings Corp. dated January 1, 2004 (5)
--------------------------------------------------------------------------------
    10.3         2004 Stock Option Plan (6)
--------------------------------------------------------------------------------
    10.4         Agreement with Regency Capital Partners dated October 1, 2004,
                 as amended November 2, 2004 (7)
--------------------------------------------------------------------------------
    10.5         Form of Securities Purchase Agreement dated as of December 22,
                 2004 between Cirond Corporation and the Purchaser named therein
                 (4)
--------------------------------------------------------------------------------
    10.6         Registration Rights Agreement dated December 22, 2004 between
                 Cirond Corporation and the Purchasers named therein (4)
--------------------------------------------------------------------------------
    10.7         Form of Common Stock Purchase Warrant (4)
--------------------------------------------------------------------------------
    10.8         Form of Additional Investment Right (4)
--------------------------------------------------------------------------------
    10.9         Source Code License Agreement dated January 21, 2004 between
                 Computer Associates International, Inc. and Cirond Networks,
                 Inc. (8)
--------------------------------------------------------------------------------
    10.10        Amendment No. 1 to the Securities Purchase Agreement, dated
                 December 22, 2004, by and among Cirond Corporation and the
                 Purchasers Signatory Thereto (9)
--------------------------------------------------------------------------------
    10.11        Promissory Notes to Amber Tiger Holdings Inc. from Cirond
                 Networks (Canada) Inc.
--------------------------------------------------------------------------------
    10.12        Source Code License Agreement dated January 19, 2006 between
                 Air Patrol Corporation and Cirond Networks, Inc.
--------------------------------------------------------------------------------
    10.13        Loan and Security Agreement dated as of April 3, 2006 between
                 Cirond Corporation and Sand Hill Finance, LLC (1)
--------------------------------------------------------------------------------
    10.14        Promissory Note from Cirond Corporation to Sand Hill Finance,
                 LLC dated April 3, 2006 in the amount of $1,700,000 (1)
--------------------------------------------------------------------------------
    10.15        Promissory Note from Cirond Corporation to Sand Hill Finance,
                 LLC dated April 4, 2006 in the amount of $2,100,000 (1)
--------------------------------------------------------------------------------


                                       18
<PAGE>
--------------------------------------------------------------------------------
  REGULATION
  S-B NUMBER                            EXHIBIT
--------------------------------------------------------------------------------
    10.16        Promissory Note from Cirond Corporation to BSGL, LLC dated
                 April 4, 2006 in the amount of $2,500,000 (1)
--------------------------------------------------------------------------------
    10.17        Warrant to Purchase Stock of Cirond Corporation dated April 3,
                 2006 issued to Sand Hill Finance, LLC (1)
--------------------------------------------------------------------------------
    10.18        Amendments to the Sand Hill Finance Promissory Notes
--------------------------------------------------------------------------------
    14.1         Code of Business Conduct and Ethics (8)
--------------------------------------------------------------------------------
    21.1         Subsidiaries of Cirond Corporation (2)
--------------------------------------------------------------------------------
    31.1         Rule 13a-14(a) Certification of Chief Executive Officer and
                 Interim Chief Financial Officer
--------------------------------------------------------------------------------
    32.1         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
                 Chief Executive Officer and Interim Chief Financial Officer
--------------------------------------------------------------------------------

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

(1)      Incorporated by reference to the exhibits to the registrant's current
         report on Form 8-K dated April 4, 2006, filed May 2, 2006.
(2)      Incorporated by reference to the exhibits to the registrant's
         registration statement on Form 10-SB, filed April 29, 2002.
(3)      Incorporated by reference to the exhibits to the registrant's current
         report on Form 8-K dated December 17, 2004, filed December 22, 2004.
(4)      Incorporated by reference to the exhibits to the registrant's current
         report on Form 8-K dated December 22, 2004, filed December 23, 2004.
(5)      Incorporated by reference to the exhibits to the registrant's annual
         report on Form 10-KSB for the fiscal year ended December 31, 2003,
         filed May 10, 2004.
(6)      Incorporated by reference to the exhibits to the registrant's current
         report on Form 8-K dated September 20, 2004, filed October 5, 2004.
(7)      Incorporated by reference to the exhibits to the registrant's current
         report on Form 8-K dated October 1, 2004, filed December 2, 2004.
(8)      Incorporated by reference to the exhibits to the registrant's annual
         report on Form 10-KSB for the fiscal year ended December 31, 2004,
         filed May 23, 2005.
(9)      Incorporated by reference to the exhibits to the registrant's quarterly
         report on Form 10-QSB for the quarter ended September 30, 2005.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

         For the fiscal years ended December 31, 2005 and 2004, our principal
accountant is expected to bill approximately $57,300 and billed $60,065
respectively, for the audit of our annual financial statements and review of
financial statements included in our Form 10-QSB filings.

AUDIT-RELATED FEES

         There were no fees billed for services reasonably related to the
performance of the audit or review of our financial statements outside of those
fees disclosed above under "Audit Fees" for fiscal years 2005 and 2004.


                                       19
<PAGE>


TAX FEES

         For the fiscal years ended December 31, 2005 and 2004, our principal
accountant is expected to bill approximately $nil and has billed $nil,
respectively, for tax compliance, tax advice, and tax planning services.

ALL OTHER FEES

         There were no fees billed for services by our principal accountant,
other than those disclosed above.

PRE-APPROVAL POLICIES AND PROCEDURES

         Prior to engaging our accountants to perform a particular service, our
board of directors obtains an estimate for the service to be performed. The
board of directors in accordance with our procedures approved all of the
services described above.






















                                       20

<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                         CIROND CORPORATION



Date:    August 7, 2006                  By:    /s/ FRANCIS E. WILDE
                                            ------------------------------------
                                               Francis E. Wilde, President

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
                   SIGNATURE                                      TITLE                               DATE
<S>                                               <C>                                       <C>
                                                  President, Chief Executive Officer ,
                                                  Interim Chief Financial Officer and
                                                  Director (Principal Executive,
/s/ FRANCIS E. WILDE                              Financial and Accounting Officer)         August 7, 2006
--------------------------------------------
Francis E. Wilde



/s/ J. DONALD HERZOG                              Director                                  August 7, 2006
--------------------------------------------
J. Donald Herzog

</TABLE>























                                       21

<PAGE>

















                  Consolidated Financial Statements of

                  CIROND CORPORATION

                  (Expressed in United States dollars)

                  Year ended December 31, 2005


















                                      F-1
<PAGE>

[KPMG LLP LETTERHEAD]

KPMG LLP                                           Telephone (250) 979-7150
CHARTERED  ACCOUNTANTS                             Telefax (250) 763-0044
300 - 1674 Bertram Street Kelowna, BC V1Y 9G4
Canada


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of
Cirond Corporation

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Cirond
Corporation  as of  December  31,  2005 and 2004  and the  related  consolidated
statements of loss,  shareholders'  equity  (deficiency) and comprehensive loss,
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 2005 and 2004 and the results of its  operations and its cash flows
for the years then ended in conformity with U.S. generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company  will  continue as a going  concern.  The Company has  suffered
recurring  losses,  negative  cash flows from  operations  and has a net working
capital  deficiency,  factors which raise  substantial doubt about the Company's
ability to continue as a going concern.  Management's  plans in regards to these
matters are described in note 2(a). The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/ KPMG LLP


Kelowna, Canada
June 28, 2006, except as to Note 11, which is as of July 10, 2006




KPMG LLP, a Canadian limited liability partnership is the Canadian
Member of KPMG International, a Swiss nonoperating association.


                                      F-2
<PAGE>
CIROND CORPORATION

Consolidated Balance Sheets

(Expressed in United States dollars)

December 31, 2005 and 2004

<TABLE>
<CAPTION>
====================================================================================================================
                                                                        December 31,                   December 31,
                                                                                2005                           2004
--------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                            <C>
ASSETS

Current assets:
     Cash                                                              $       1,272                  $   1,308,086
     Amounts receivable, net of allowance of $nil (2004 - $nil)                9,541                         14,883
     Prepaid expenses and deposits                                            13,852                         17,873
     ---------------------------------------------------------------------------------------------------------------
                                                                              24,665                      1,340,842

Property and equipment (note 3)                                               53,291                         57,875

Website development (note 4)                                                       -                          6,342

--------------------------------------------------------------------------------------------------------------------
                                                                       $      77,956                  $   1,405,059
====================================================================================================================

Liabilities and Stockholders' Equity (Deficiency)

Current liabilities:
     Accounts payable and accrued liabilities                          $    280,520                   $     188,698
     Consulting fees payable (note 5)                                        145,000                        134,611
     Deferred revenue                                                              -                          5,874
     Dividends payable                                                       100,000                          2,466
     Share subscriptions payable (note 6)                                    400,000                        400,000
     Due to related company (note 7)                                          23,478                              -
     Due to stockholder (note 8)                                                   -                        111,575
     ---------------------------------------------------------------------------------------------------------------
                                                                             948,998                        843,224

Redeemable, convertible preferred stock with a par value of
   $0.001.  25,000,000 authorized, 2,000 issued (December 31,
   2004 - 2,000), net of deferred financing costs (note 9)                   138,000                         70,500

Stockholders' equity (deficiency):
     Capital stock:
           100,000,000  voting common shares, with $0.001 par value
                        authorized, 37,110,000 issued (December 31,
                        2004 - 37,110,000)                                    37,110                         37,110
     Additional paid-in capital                                            4,095,107                      3,595,739
     Deficit                                                              (5,141,259)                    (3,141,514)
     ---------------------------------------------------------------------------------------------------------------
                                                                          (1,009,042)                       491,335
Going concern (note 2(a))
Commitments (note 9)
Subsequent events (note 10)
--------------------------------------------------------------------------------------------------------------------
                                                                       $      77,956                  $   1,405,059
====================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
CIROND CORPORATION

Consolidated Statements of Loss

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
===============================================================================================================
                                                                                     2005                 2004
---------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                   <C>
Revenue (note 13)                                                          $      120,642        $     955,931

Expenses:
     Advertising and promotion                                                    102,836              220,715
     Amortization                                                                  32,119               26,045
     Consulting fees (note 4)                                                     744,244              868,883
     Foreign currency exchange loss (gain)                                         (1,355)               4,855
     Gain on debt settlement                                                      (11,389)                   -
     Gain on recovery of account payable                                          (50,000)                   -
     Interest                                                                       2,018                3,532
     Office and administrative                                                     68,531               72,387
     Professional fees                                                            147,064              203,775
     Research and development                                                     216,692              576,894
     Salaries and benefits                                                        227,690              238,598
     Travel                                                                        89,510              181,413
     ----------------------------------------------------------------------------------------------------------
                                                                                1,567,960            2,397,097

---------------------------------------------------------------------------------------------------------------
Loss before interest income                                                    (1,447,318)          (1,441,166)

Interest income                                                                     5,073                3,727

---------------------------------------------------------------------------------------------------------------
Loss                                                                       $   (1,442,245)       $  (1,437,439)
===============================================================================================================

Weighted average number of common shares outstanding,
   basic and diluted                                                           36,628,219           35,451,397

Loss per common share, basic and diluted                                   $        (0.05)       $       (0.04)
===============================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-4

<PAGE>
CIROND CORPORATION

Consolidated Statement of Stockholders' Equity (Deficiency) and Comprehensive
Loss

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004
<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                                                               Total
                                                                                        Additional                     stockholders'
                                                                     Common Stock          paid-in                            equity
                                                                  Shares      Amount       capital        Deficit       (deficiency)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>         <C>           <C>             <C>

Balance, December 31, 2002                                      17,000,000   $  1,700    $  298,672    $  (503,500)    $   (203,128)

Shares held by Cirond stockholders and effect of
   recapitalization transaction (note 3)                        16,160,000          1           -         (124,647)        (124,646)

Promissory notes converted to shares at $0.50 per share
   (note 3)                                                      1,300,000        130       649,870            -            650,000

Adjustment to capital stock to equal par value of Cirond
   capital stock                                                       -      132,629       (32,629)           -                -

Comprehensive loss:
   Loss                                                                -          -             -       (1,063,962)      (1,063,962)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2003                                      34,460,000     34,460       915,913     (1,692,109)        (741,736)
Common shares issued for cash at $0.50 per share (net of
   costs)                                                          700,000        700       322,800            -            323,500

Common shares issued for share subscriptions                       750,000        750       374,250            -            375,000

Common shares issued for consulting services held in
   escrow (note 11)                                              1,200,000      1,200       228,776            -            229,976

Financing cost assigned to warrants issued in connection
   with redeemable, convertible preferred shares less
   financing costs (note 10)                                           -          -         569,000            -            569,000

Beneficial conversion option on redeemable, convertible of
   preferred shares (note 10)                                          -          -       1,185,000            -          1,185,000

Accretion of discount on redeemable, convertible preferred
   shares (note 10)                                                    -          -             -           (8,900)          (8,900)

Amortization of deferred financing costs (note 10)                     -          -             -             (600)            (600)

Dividend on redeemable, convertible preferred shares                   -          -             -           (2,466)          (2,466)

Comprehensive loss:
   Loss                                                                -          -             -       (1,437,439)      (1,437,439)

------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004                                      37,110,000   $ 37,110    $3,595,739    $(3,141,514)    $    491,335
====================================================================================================================================

Common shares released from escrow in consideration of
   consulting services (note 8)                                        -          -         109,368            -            109,368

Deemed distribution on redeemable, convertible preferred
   stock (note 9)                                                      -          -         390,000       (390,000)      (1,567,300)

Accretion of discount on redeemable, convertible preferred
   stock (note 9)                                                      -          -             -          (63,100)         (45,900)

Amortization on deferred financing costs (note 9)                      -          -             -           (4,400)         (16,500)

Dividend on redeemable, convertible preferred stock                    -          -             -         (100,000)        (100,000)

Comprehensive loss:
   Loss                                                                -          -             -       (1,442,245)      (1,442,245)

------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005                                      37,110,000   $ 37,110    $4,095,107    $(5,141,259)    $ (2,571,242)
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.

                                      F-5
<PAGE>
CIROND CORPORATION

Consolidated Statements of Cash Flows

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
===============================================================================================================
                                                                                     2005                 2004
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                  <C>
Cash provided by (used in):

Operations:
     Loss                                                                 $    (1,442,245)     $    (1,437,439)
     Item not involving cash:
         Amortization                                                              32,119               26,045
         Common shares issued for services                                        109,368              229,976
         Recovery of research and development expense                            (100,000)                   -
         Gain on debt settlement                                                  (11,389)                   -
         Gain on recovery of account payable                                      (50,000)                   -
     Changes in non-cash working capital:
         Amounts receivable                                                         5,342                4,796
         Prepaid expenses and deposits                                              4,021               (5,381)
         Accounts payable and accrued liabilities                                 141,822               23,176
         Consulting fees payable                                                   10,389               (4,611)
         Deferred revenue                                                          (5,874)              (1,010)
     ----------------------------------------------------------------------------------------------------------
                                                                               (1,306,447)          (1,155,226)
Financing:
     Advances from related company                                                 23,478                    -
      Advances from (to) stockholder                                                 (186)             (60,001)
     Dividends paid                                                                (2,466)                   -
     Common shares issued for cash, net of costs                                        -              323,500
     Redeemable, convertible, preferred shares and
       warrants issued for cash, net of financing costs                                 -            1,815,000
     Share subscriptions proceeds                                                       -              400,000
     Loan payable repayment                                                             -              (75,000)
     ----------------------------------------------------------------------------------------------------------
                                                                                   20,826            2,403,499

Investing:
     Expenditures on property, plant and equipment                                (21,193)             (26,253)

---------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash                                                    (1,306,814)           1,222,020

Cash, beginning of period                                                       1,308,086               86,066

---------------------------------------------------------------------------------------------------------------
Cash, end of period                                                       $         1,272      $     1,308,086
===============================================================================================================

Supplementary information:
  Interest paid                                                           $         2,018      $         3,532
  Income taxes paid                                                       $             -      $             -
===============================================================================================================

Non-cash financing and investing activities:
     Amount due to stockholder settled through the assignment
         of an account receivable                                         $       100,000      $             -
     Common shares issued for share subscription
       proceeds in the previous period                                    $             -      $       375,000
     Deemed distribution on redeemable, convertible
       preferred stock                                                    $       390,000      $             -
===============================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

1.   OPERATIONS:

     Cirond  Corporation  ("Cirond" or the "Company") is incorporated  under the
     laws of the State of Nevada.  The Company develops  software  solutions and
     provides network security  products and consulting  services to governments
     and  private  sector  businesses  to combat  the  threat to wired  networks
     represented  by the  deployment  of  unauthorized  wireless  networks.  The
     Company's  solutions  can  also be used to  implement,  secure  and  manage
     wireless networks.

2.   SIGNIFICANT ACCOUNTING POLICIES

     a)  Going concern

         These  financial  statements  have been  prepared on the going  concern
         basis,  which  assumes the  realization  of assets and  liquidation  of
         liabilities  and  commitments  in the normal course of business for the
         foreseeable  future.  The Company has realized a loss of $1,442,245 and
         incurred  negative cash flow from operations of $1,306,814 for the year
         ended December 31, 2005 and has an accumulated deficit of $5,141,259 as
         at December 31, 2005. These factors raise  substantial  doubt as to the
         Company's ability to continue as a going concern.

         The  application  of the going  concern  concept is dependent  upon the
         Company's  ability  to receive  continued  financial  support  from its
         creditors, stockholders and external investors and attaining profitable
         operations  through  the  sale  of  its  software.  These  consolidated
         financial  statements do not give effect to any  adjustment  should the
         Company be unable to continue as a going  concern  and,  therefore,  be
         required to realize its assets and discharge its  liabilities  in other
         than the normal course of business and at amounts  differing from those
         reflected in the consolidated financial statements. Management plans to
         obtain  equity  and  debt  financing  from  external  investors  and to
         actively market its wireless technology applications.

         Management believes the plan described above will be sufficient to meet
         the Company's  liabilities  and commitments as they become payable over
         the next twelve  months.  There can be no assurance  that  management's
         plan will be  successful.  Failure to obtain the support of  additional
         external  investors  to finance the  development  and  marketing of the
         Company's  wireless  technology  applications will cause the Company to
         curtail  operations  and impair the Company's  ability to continue as a
         going concern.

     b)  Basis of consolidation

         These  financial  statements  have been  prepared  in  accordance  with
         accounting  principles  generally  accepted  in the  United  States  of
         America and include  the  accounts of the Company and its  wholly-owned
         subsidiaries Cirond Networks Inc. and Cirond Networks (Canada) Inc. All
         material intercompany balances and transactions have been eliminated.


                                      F-7
<PAGE>
CIROND CORPORATION

Notes to Consolidated  Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     c)  Property, plant and equipment

         Property,  plant and  equipment,  consisting  of computer  hardware and
         software  and office  equipment,  are  recorded  at cost.  The  Company
         monitors the  recoverability of property,  plant and equipment based on
         estimates  using  factors such as expected  future  asset  utilization,
         business climate and future  undiscounted cash flows expected to result
         from the use of the related  assets or be realized on sale. The Company
         recognizes an impairment loss if the projected undiscounted future cash
         flows are less than the carrying  amount.  The amount of the impairment
         charge,  if any, is measured  equal to the excess of the carrying value
         over the  expected  future cash flows  discounted  using the  Company's
         average cost of funds.  To date no such  impairment has been indicated.
         Amortization  is provided  on a  straight-line  basis at the  following
         annual  rates which are  intended  to amortize  the cost of assets over
         their estimated useful life:

         =======================================================================
                                                                          Rate
         -----------------------------------------------------------------------

         Computer hardware                                                33%
         Computer software                                                50%
         Furniture and equipment                                          20%
         =======================================================================

d)       Website development

         Website  development  costs incurred in the planning stage are expensed
         as incurred.  The costs of application and  infrastructure  development
         incurred subsequent to the preliminary project stage that have received
         management  approval  for  further  development,  are  capitalized  and
         amortized on the straight-line  method over their estimated useful life
         (estimated to be three years). Once the website is developed, operating
         costs are expensed as incurred.







                                      F-8
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     e)  Revenue recognition

         In  accordance  with  the  provisions  of  the  American  Institute  of
         Certified  Public  Accountant's  Statement of Position  97-2  "Software
         Revenue  Recognition",   revenue  from  software  license  sales,  both
         directly and through value-added resellers, is recognized once delivery
         has occurred,  evidence of an arrangement  exists, the fee is fixed and
         determined and collection of the fee is probable, provided there are no
         significant  vendor  obligations   remaining.   The  Company  estimates
         allowances  for  returns  arising  from  warranty  provisions  based on
         historical experience. For multiple element arrangements,  where Vendor
         Specific Objective Evidence ("VSOE") of fair value is available for all
         elements,   the   contract   value  is   allocated   to  each   element
         proportionately  based upon  relative VSOE of fair value and revenue is
         recognized  separately  for each  element.  Where VSOE of fair value is
         available for all undelivered elements,  the residual method is used to
         value the delivered elements. Where VSOE of fair value is not available
         for an undelivered  element all revenue for the arrangement is deferred
         until the earlier of the point at which VSOE does exist or all elements
         of the arrangement have been delivered, unless the undelivered elements
         are post  contract  customer  support  arrangements,  in which case the
         arrangement revenue is recognized  ratably, or services,  in which case
         the  arrangement  revenue is  recognized  as the services are provided.
         Periodically  we sell to  value-added  resellers  ("VAR")  under  terms
         consistent with those applied to other customers. We do not offer price
         protection  or rights of  return  to VARs and  consideration  terms and
         sales are not dependant on the option of the resellers.

     f)  Product development costs

         Costs for the  development  of new  software  are  expensed as incurred
         until technological feasibility has been established, at which time any
         additional  development  costs are  capitalized in accordance with SFAS
         No. 86,  "Accounting  for the Costs of  Computer  Software  to be Sold,
         Leased or Otherwise Marketed". The Company believes its current process
         for developing software is essentially completed  concurrently with the
         establishment of technological feasibility,  accordingly, no costs have
         been capitalized to date.








                                      F-9
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2004 and 2003
================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     g)  Income taxes

         The Company  accounts  for income  taxes using the asset and  liability
         method.  Under the asset and liability method,  deferred tax assets and
         liabilities are recognized for the future tax consequences attributable
         to  differences  between the financial  statement  carrying  amounts of
         existing  assets and liabilities  and their  respective tax bases,  and
         operating loss and tax credit carry  forwards.  Deferred tax assets and
         liabilities  are measured  using enacted tax rates expected to apply to
         taxable income in the years in which those  temporary  differences  are
         expected to be recovered or settled.  The effect on deferred tax assets
         and liabilities of a change in tax rates is recognized in income in the
         period that includes the enactment date.

         When it is not  considered  to be more  likely than not that a deferred
         tax asset will be realized,  a valuation  allowance is provided for the
         excess.

         No amount has been  reflected  on the  consolidated  balance  sheet for
         deferred  income taxes as any deferred  income tax asset has been fully
         offset by a valuation allowance.

     h)  Loss per share

         Loss per share is calculated  by increasing  the loss for the period by
         distributions,  deemed  distributions and allocation to the redeemable,
         convertible preferred shares to arrive at the loss available for common
         shareholders.  This  number is then  divided  by the  weighted  average
         number of shares  outstanding  in the period.  As the Company has a net
         loss in each of the years  presented,  basic and diluted loss per share
         are the same.

     i)  Stock based compensation

         The Company  has an  outstanding  stock  option plan that is subject to
         final shareholder approval,  pursuant to which the Company has reserved
         6,710,000  shares  of  common  stock  to grant  to  certain  employees,
         officers, directors and consultants.

         The Company accounts for its employee (including director)  stock-based
         compensation  arrangements  in accordance with provisions of Accounting
         Principles  Board ("APB") Opinion No. 25.  "ACCOUNTING FOR STOCK ISSUED
         TO  EMPLOYEES",   and  related   interpretations.   Under  this  method
         stock-based  compensation  expense is only  recorded to the extent that
         equity  securities  are issued to employees  at an exercise  price less
         than the market value at the date of grant. Stock options, common stock
         and other  equity  instruments  issued to  non-employees  for  services
         received is based upon the fair value of the equity instruments issued,
         as the services are provided and the securities earned.

         SFAS No.  123,  "ACCOUNTING  FOR  STOCK-BASED  COMPENSATION",  requires
         entitles  that  continue to apply the  provisions of APB Opinion No. 25
         for  transactions  with  employees  to provide  pro forma net  earnings
         (loss) and pro forma earnings (loss) per share disclosures for employee
         stock option grants as if the  fair-value-based  method defined in SFAS
         No. 123 had been applied to these transactions.


                                      F-10
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     i)  Stock based compensation (continued)

         As the  Company's  stock  option  plan  has yet to be  approved  by the
         Company's  shareholders,  no stock  options were granted to  employees,
         officers,  directors or  consultants  for the years ended  December 31,
         2005 and 2004.  Accordingly,  there would be no difference  between the
         Company's reported loss and loss per common share for these periods had
         the Company accounted for compensation costs based on the fair value of
         stock options issued for services under SFAS No. 123.

     j)  Translation of financial statements

         The  Company's  functional  currency is the United States  dollar.  The
         Company's  subsidiary,  Cirond  Networks  (Canada) Inc.  ("CNI Canada")
         operates in Canada and incurs the  majority of its expenses in Canadian
         dollars, however the United States dollar has been determined to be its
         functional currency, as CNI Canada is entirely reliant upon the Company
         to fund its operations  and the majority of the Company's  consolidated
         sales are in United States dollars and to the United States  customers.
         Accordingly  the method of translation of Canadian dollar balances into
         the United States dollar is as follows:

         i)   Monetary  assets  and  liabilities  are  translated at the rate of
              exchange in effect at the balance sheet date.

         ii)  Non-monetary assets  and liabilities are translated at the rate of
              exchange in effect at the date the transaction occurred.

         iii) Revenues  and  expenses  are  translated  at the  exchange rate in
              effect at the transaction date.

         iv)  The net adjustment arising from the translation is included in the
              consolidated statement of loss.

     k)  Recent accounting pronouncements

         FASB  issued a revision  of SFAS No. 123  "ACCOUNTING  FOR  STOCK-BASED
         COMPENSATION"  ("SFAS No.  123(R)").  SFAS No. 123(R) requires a public
         entity to measure  the cost of employee  services  received in exchange
         for an award of equity  instruments  based on the grant date fair value
         of the  award.  The  compensation  cost is to be  recognized  over  the
         service  period  which  is  determined  by  the  vesting  period.  This
         statement is effective  for public  entities  that do not file as small
         business  issuers as of the  beginning  of the first  fiscal  year that
         begins  after June 15,  2005.  The  adoption of a revised SFAS 123 will
         impact  the  Company's  operating  expenses  and  shareholders'  equity
         (deficiency),  in the year the Company adopts the revised standard,  to
         the extent that the Company issues stock options in  consideration  for
         services in connection with its proposed stock option plan.



                                      F-11

<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     k)  Recent accounting pronouncements (continued)

         In May 2005, the FASB issued SFAS No. 154 "Accounting Changes and Error
         Corrections"   ("SFAS  154"),   which   replaces  APB  Opinion  No.  20
         "Accounting  Changes" and SFAS No. 3, "Reporting  Accounting Changes in
         Interim Financial Statements - An Amendment of APB Opinion No. 28" SFAS
         154 provides guidance on the accounting for and reporting of accounting
         changes   and   error   corrections.   It   establishes   retrospective
         application,  unless such an approach  is  impracticable  in which case
         prospective  application of the change is appropriate,  as the required
         method for reporting a change in accounting principle and the reporting
         of a  correction  of an error.  SFAS 154 is  effective  for  accounting
         changes and  corrections of errors made in fiscal years beginning after
         December 15, 2005 and is required to be adopted in our first quarter of
         fiscal 2006.  Prior to SFAS 154, most accounting  changes were recorded
         effective at the beginning of the year of change,  with the  cumulative
         effect at the  beginning of the year of change  recorded as a charge or
         credit to  earnings in the period a change was  adopted.  The impact of
         the adoption of SFAS 154 will have on our  financial  statements is not
         yet determinable.

         In November  2005,  the FASB  issued FSP FAS 115-1 and FAS 124-1,  "The
         Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to
         Certain   Investments"   ("FSP115-1"),   which  provides   guidance  on
         determining when investments in certain debt and equity  securities are
         considered impaired,  whether that impairment is  other-than-temporary,
         and  on  measuring  such  impairment   loss.   FSP115-1  also  includes
         accounting   considerations   subsequent  to  the   recognition  of  an
         other-than-temporary  impairment and requires certain disclosures about
         unrealized losses that have not been recognized as other-than-temporary
         impairments.  FSP115-1 is required to be applied to  reporting  periods
         beginning  after December 15, 2005 and is required to be adopted in our
         first  quarter of fiscal 2006. As the Company does not have any debt or
         equity  investments,  the impact of the  adoption  of  FSP115-1  is not
         expected to impact our financial statements.

     l)  Use of estimates

         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 disclosure of contingent  assets
         and  liabilities  at the  date  of the  financial  statements  and  the
         reported  amounts of revenues  and expenses  during the period.  Actual
         results could differ from those estimates.



                                      F-12

<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

3.   PROPERTY, PLANT AND EQUIPMENT:

     ===========================================================================
     2005                                        Cost     Accumulated   Net book
                                                         amortization      value
     ---------------------------------------------------------------------------

     Computer hardware                    $    79,097   $   37,477     $  41,620
     Computer software                         15,694       15,694             -
     Furniture and equipment                   28,917       17,246        11,671
     ---------------------------------------------------------------------------
                                          $   123,708   $   70,417     $  53,291
     ===========================================================================


     ===========================================================================
     2004                                        Cost     Accumulated   Net book
                                                         amortization      Value
     ---------------------------------------------------------------------------

     Computer hardware                    $    56,732   $   19,545     $  37,187
     Computer software                         14,485        9,752         4,733
     Furniture and equipment                   28,349       12,394        15,955
     ---------------------------------------------------------------------------
                                          $    99,567   $   41,692     $  57,875
     ===========================================================================


4.   WEBSITE DEVELOPMENT:

     ===========================================================================
     2005                                        Cost     Accumulated   Net book
                                                         amortization      Value
     ---------------------------------------------------------------------------

     Website development costs            $    19,025   $   19,025     $       -

     ===========================================================================

     ===========================================================================
     2004                                        Cost     Accumulated   Net book
                                                         amortization      Value
     ---------------------------------------------------------------------------

     Website development costs            $    19,025   $   12,683     $   6,342

     ===========================================================================


5.   RELATED PARTY TRANSACTIONS:

     During the year ended  December 31, 2005, the Company  incurred  consulting
     fees from a company  controlled by the Company's former President and Chief
     Executive  Officer  totaling  $180,000  (2004 - $180,000).  At December 31,
     2005,  $75,000 (2004 - $40,000) of these  consulting  fees were included in
     consulting fees payable.

     The  amounts  were  incurred  in the normal  course of  operations  and are
     recorded at the exchange amount, which is the amount established and agreed
     to by the related parties.


                                      F-13
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================


6.   SHARE SUBSCRIPTIONS PAYABLE:

     In April 2004,  the Company  received a subscription  for 4,000,000  common
     shares and common share purchase warrants for aggregate cash proceeds of $2
     million pursuant to an irrevocable  subscription agreement.  The subscriber
     was granted common share purchase warrants as follows:

     ===========================================================================
     Number of common shares      Exercise price                     Expiry date
     ---------------------------------------------------------------------------

     1,000,000                       $      0.50                  April 19, 2005
     1,000,000                       $      0.75                  April 19, 2005
     1,000,000                       $      1.00                  April 19, 2006
     1,000,000                       $      1.25                  April 19, 2006
     ===========================================================================

     In May 2004, the subscriber requested that his investment be rescinded and,
     without waiving any of its rights it may have against the  subscriber,  the
     Company  returned $1.5 million,  and subsequently  repaid $100,000,  of the
     $2.0 million share subscription to the subscriber.  As at December 31, 2005
     and  subsequent  to December  31, 2005,  the Company  offered to return the
     remaining  $400,000 to the subscriber upon execution of a mutual settlement
     agreement. The subscriber has refused the offer. If such refusal continues,
     the  Company  intends to issue  common  shares and  common  share  purchase
     warrants under the terms  initially  agreed to. The outcome of this matter,
     including the  settlement  of the liability  through the payment of cash or
     issuance  of common  shares  and  common  share  purchase  warrants  and if
     additional  costs will be  incurred  on the  settlement  of the  liability,
     cannot be determined at this time.


7.   DUE TO RELATED COMPANY:

     The amounts due to a company  controlled by the Company's  former President
     and Chief  Executive  Officer,  totaling  CDN$27,500,  are unsecured,  bear
     interest at 2% per month, and have no fixed terms of repayment.


8.   DUE TO STOCKHOLDER:

     The amount due to a stockholder is unsecured,  non-interest bearing and has
     no fixed terms of repayment.




                                      F-14

<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

9.   REDEEMABLE, CONVERTIBLE PREFERRED STOCK:

     On  December  22,  2004  the  Company  entered  into  Securities   Purchase
     Agreements with several accredited  investors pursuant to which the Company
     agreed to sell,  and the  Investors  agreed to  purchase,  2,000  shares of
     Series B 5% Convertible  Preferred  Stock,  warrants to purchase  2,325,584
     shares  of common  stock,  and  Additional  Investment  Rights  for a total
     consideration  of  $2,000,000.  For the year ended  December 31, 2005,  the
     Company  has  accrued  dividends  totaling  $100,000  related to the issued
     preferred shares.  The warrants were originally  exercisable for five years
     at $0.55 per share.  The Preferred Stock were originally  convertible  into
     shares  of common  stock at a price of $0.43  per  share at any time  after
     issuance. The Additional Investment Rights entitle the Purchasers to buy up
     to $4,000,000 of Preferred  Stock and warrants on the same terms for period
     of six months  following the effective date of a Registration  Statement on
     Form SB-2 related to common shares to be issued on conversion or redemption
     of the preferred shares.  In connection with the subscription,  Cirond paid
     Ascendiant   Securities,   LLC  a  cash   commission   of  $160,000  and  a
     non-accountable   expense  allowance  of  $25,000,  and  issued  Ascendiant
     warrants  for the  purchase of up to  1,674,419  shares of common  stock at
     $0.55 per share.  The  warrants  are  exercisable  for a  five-year  period
     commencing  from the date on which  the  right  to  exercise  the  warrants
     vested.

     As  at  December  31,  2005,  372,093  Ascendiant   warrants  were  vested.
     Ascendiant  will be entitled to further  vested  warrants as the  investors
     exercise their warrants and the Additional Investment Right securities. The
     warrants  contain  piggyback   registration   rights  and  a  net  exercise
     provision.

     The terms of the preferred  stock provide that on the fifth  anniversary of
     the original issue date  (December 22, 2009),  the Company shall redeem all
     of the then  outstanding  shares of preferred stock, for an amount in cash,
     or if certain conditions are met during the 30 days prior to the redemption
     date and at the  election  of the  Company,  in  shares  of  common  stock.
     Accordingly,  only  unconverted  preferred  shares  will be subject to this
     redemption  feature.  As the redemption  feature of the preferred shares is
     contingent upon the holder not having  converted the preferred  shares into
     common shares prior to the specified  date,  management  has concluded that
     the  redeemable,  convertible  preferred  shares  are  not  required  to be
     classified as a liability under SFAS 150 but that this feature represents a
     contingent redemption feature under paragraph 10 of the standard.  However,
     as all of the conditions,  as defined in the Securities Purchase Agreement,
     must be met for the Company to be able to redeem any outstanding shares for
     other then cash, management has concluded that the preferred shares must be
     classified as equity but outside of permanent  shareholders'  deficiency in
     accordance with SEC Regulation S-X5-02(28).




                                      F-15

<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================


9.   REDEEMABLE, CONVERTIBLE PREFERRED STOCK (CONTINUED):

     The gross proceeds of $2,000,000  and net proceeds of $1,815,000  have been
     allocated between the redeemable  preferred stock and common share purchase
     warrants  based on their  relative fair values at the issue date.  The fair
     value of the warrants was estimated  using the Black Scholes option pricing
     model using the expected useful lives of the warrants,  a volatility factor
     of 90%, a risk free rate of 4.0% and no assumed dividend rate. Accordingly,
     $627,000  of the gross  proceeds  and  $569,000  of the net  proceeds  were
     assigned  to  warrants  and  included  in  additional  paid-in  capital and
     $1,373,000  of the gross  proceeds and  $1,246,000 of the net proceeds were
     assigned to redeemable, convertible preferred shares.

     A  beneficial   conversion  option  existed  at  the  issue  date  for  the
     redeemable,  convertible preferred shares, as the conversion price of $0.43
     per share was less than the quoted market value of the common shares on the
     issue  date.  The  beneficial   conversion  option  was  calculated  to  be
     $1,185,000 and recorded as a discount to redeemable,  convertible preferred
     stock and an increase in additional paid-in capital.

     The discount between the redemption amount and allocated  proceeds is being
     accreted  to the  redemption  price  on  December  22,  2009  and  deferred
     financing  costs are being  amortized  to December 22, 2009 by the interest
     method with the accretion and amortization charged to deficit. The balances
     at December 31, 2005 are as follows:

<TABLE>
<CAPTION>
     =========================================================================================================
                                                    Redeemable
                                                   Convertible                  Deferred
                                                     Preferred                 Financing
                                                        Shares                     Costs                 Total
     ---------------------------------------------------------------------------------------------------------
<S>                                          <C>                       <C>                     <C>
     Consideration                           $       2,000,000         $        (185,000)      $     1,815,000

     Assigned to warrants                             (627,000)                   58,000              (569,000)
     ---------------------------------------------------------------------------------------------------------
                                                     1,373,000                  (127,000)            1,246,000

     Beneficial conversion option                   (1,185,000)                     -               (1,185,000)
     ---------------------------------------------------------------------------------------------------------
                                                       188,000                  (127,000)               61,000

     Accretion and amortization to
       December 31, 2004                                 8,900                       600                 9,500
     ---------------------------------------------------------------------------------------------------------
     Balance, December 31, 2004                        196,900                  (126,400)               70,500
     Accretion and amortization to
       December 31, 2005                                45,900                    16,500                62,400

     ---------------------------------------------------------------------------------------------------------
     Balance, December 31, 2005              $         242,800         $        (109,900)      $       132,900
     =========================================================================================================
</TABLE>



                                      F-16
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

9.   REDEEMABLE, CONVERTIBLE PREFERRED STOCK (CONTINUED):

     In August  2005,  the  Company and the  investors  amended the terms of the
     Securities Purchase Agreements  including adjusting the conversion price of
     the redeemable,  convertible preferred stock to $0.25 per share,  adjusting
     the  exercise  price of the  investors'  warrants  to $0.30  per  share and
     terminating the Additional  Investment  Rights.  The Company has recorded a
     deemed distribution to the preferred shareholders due to the changes in the
     modification  of conversion  price and warrant  exercise price of $390,000,
     equal to the excess of the fair value of these rights  immediately prior to
     and subsequent to the amendment.  Fair value was estimated  using the Black
     Scholes  option  pricing  model using the expected  period to conversion or
     exercise,  a volatility factor of 152%, a risk-free  interest rate of 4.13%
     and no assumed dividend rate.


10.  COMMON SHARES ISSUED FOR CONSULTING SERVICES:

     On August 2, 2004, Cirond entered into a Management Services Agreement with
     Securities Trading Services Inc. ("STS"). The agreement was effective as of
     August 2, 2004 and has a term of two  years.  Pursuant  to the terms of the
     agreement, Cirond must issue 1,200,000 shares of its common stock to STS in
     consideration  of services to be provided by STS. Common shares in the name
     of STS will be held in escrow  by  Cirond,  with  Cirond  releasing  50,000
     shares from escrow for every month as services are  performed.  STS may not
     vote any unearned  shares held in escrow.  In the event of a termination of
     the  agreement  by Cirond for breach or cause,  Cirond may  repurchase  and
     cancel any  unearned  shares  for  $0.001  per share in an amount  equal to
     50,000  shares  times the number of months  remaining  under the  agreement
     after  termination.  STS was  granted  piggy-back  registration  rights  in
     connection  with the agreement and the shares are subject to  anti-dilution
     provisions in the event of a  consolidation  of Cirond's share capital.  In
     addition, upon closing of an equity financing of $1 million dollars, Cirond
     shall pay a  consulting  fee in the  amount of $5,000 to STS upon the first
     day of each month over the remaining  term of the  contract.  Subsequent to
     December 31, 2004, the monthly consulting was increased to an agreed amount
     of $10,000 per month.  The  agreement  also  provides  for the  accelerated
     release of shares from  escrow,  if STS secures  financing  for Cirond,  as
     follows:

       o   100,000 shares upon STS securing an equity financing of $1 million.
       o   An additional 200,000 shares upon STS securing and additional $2
           million of equity financing.
       o   An additional 450,000 shares upon STS securing an additional $5
           million of equity financing.
       o   An additional 450,000 shares upon STS securing an additional $5
           million of equity.




                                      F-17
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================


10.  COMMON SHARES ISSUED FOR CONSULTING SERVICES (CONTINUED):

     Common  shares are valued as services are  performed  and common shares are
     earned and eligible for release from escrow.  As of August 1st,  2005,  the
     agreement  with STS was  terminated  by the Company for reasons  other than
     cause and, as a result,  the Company accrued a payable equal to one year of
     services,  in accordance with the contract terms, and recorded compensation
     costs of $26,225  related to common shares in escrow as at the  termination
     date.  For the  year  ended  December  31,  2005,  a total of  $109,368  in
     compensation expense was included in consulting fees.

11.  SUBSEQUENT EVENTS:

     a)  Air Patrol Licensing Agreement:

         Effective,  January  19,  2006,  the  Company  negotiated  a  licensing
         agreement  for the  Air  Patrol  product  line  with a  non-arms-length
         entity. In connection with the agreement,  the entity agreed to pay the
         Company royalties equal to 20% of gross sales of Air Patrol products on
         or before January 19, 2007,  15% of gross sales of Air Patrol  products
         between  January 20, 2007 and January 19,  2008,  10% of gross sales of
         Air Patrol  products  between January 20, 2008 and January 19, 2009, 8%
         of gross  sales of Air Patrol  products  between  January  20, 2009 and
         January  19,  2010  and  5% of  gross  sales  of  Air  Patrol  products
         thereafter. In addition, the Company will receive royalties equal to 5%
         of gross sales from derivative versions of the Air Patrol products.  On
         the effective date of the transaction,  the Company received an advance
         payment of $50,000 in  consideration  of future  royalties  as provided
         above.

     b)   ServGate Technologies transaction:

         The Company entered into a Foreclosure Sale Agreement (the "Agreement")
         dated as of April 4, 2006 among Sand Hill Finance,  LLC ("Sand  Hill"),
         the Company,  ServGate Technologies,  Inc. ("ServGate"),  and BSGL, LLC
         ("BSGL"),  pursuant to which the Company  agreed to acquire  certain of
         the  personal  property  assets of  ServGate,  consisting  primarily of
         intellectual  property,  and assume  certain of ServGate's  liabilities
         from Sand Hill and BSGL, who were secured senior lenders  holding those
         assets as collateral on existing  loans that were in default.  ServGate
         had developed unified threat management  software and had more than 100
         employees in the United  States,  Canada,  and China.  The Company also
         issued  9,000,000  shares  of the  Company's  Common  Stock  to BSGL in
         accordance  with the terms of the Agreement.  The  acquisition was made
         pursuant  to a  private  foreclosure  sale  under  Section  9610 of the
         California  Uniform  Commercial  Code.  On April 10, 2006,  the Company
         completed  its  acquisition  of the  assets and the  assumption  of the
         specified  liabilities  of  ServGate  pursuant  to  the  terms  of  the
         Agreement.  The Company has initially, and on a preliminary basis only,
         allocated the assets acquired and liabilities  from ServGate and shares
         of common stock issued to BSGL, in connection  with the  transaction as
         follows:


                                      F-18
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

11.  SUBSEQUENT EVENTS (CONTINUED):

     b)  ServGate Technologies transaction (continued):

         Net assets acquired:
              Intangible assets - technology and patents             $8,081,000
              Accounts payable and accrued liabilities               (3,121,000)
              Promissory note payable to Sand Hill                   (2,100,000)
              Promissory note payable to BSGL                        (2,500,000)
              ------------------------------------------------------------------
                                                                        360,000
         Consideration given:
              9,000,000 shares of common stock to BSGL                 $360,000

         =======================================================================


         The allocation of the purchase  price on this  transaction as described
         above  is  subject  to  modification  based  on  the  Company's  formal
         assessment of the fair value of the net assets  acquired,  and any such
         modification may be material. In connection with the acquisition of the
         assets  described above, the Company obtained a secured bridge loan for
         $1,700,000  from Sand Hill and executed the above  promissory  notes to
         Sand Hill and BSGL. All of these  obligations are secured by a security
         interest in the purchased assets and the $2,100,000  promissory note to
         Sand Hill is also  guaranteed  by certain  management  of ServGate  and
         Cirond up to $1,915,000. The security interest of the bridge lender, up
         to a  principal  amount  of  $1,700,000  (plus  interest  and  costs of
         enforcement), has first priority, the security interest of Sand Hill up
         to a  principal  amount  of  $2,100,000  (plus  interest  and  costs of
         enforcement)  is  second,  and the  security  interest  of BSGL up to a
         principal amount of $2,500,000 (plus interest and costs of enforcement)
         is third.

         The $1,700,000 bridge loan accrues interest at 10% per annum,  requires
         quarterly  interest payments beginning July 1, 2006, and is due October
         1, 2006. If revenues generated by the Company through June 30, 2006 are
         less than  $1,500,000,  then Sand Hill will have the  option to require
         payment  of the loan in full on the day that is 90 days  after June 30,
         2006.  To June  30,  2006,  the  Company  has  made  not all  scheduled
         principal  and interest  payments and has not  generated  $1,500,000 in
         revenues.  Sand Hill has not taken  action to demand  repayment  of the
         loan as a result of the events.  Proceeds of the bridge loans were used
         for payments to Sand Hill to reduce the $2,100,000 principal balance of
         its note and accrued liabilities that the Company had assumed.



                                      F-19
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================


11.  SUBSEQUENT EVENTS (CONTINUED):

     b)  ServGate Technologies transaction (continued):

         The note for $2,100,000  made payable to Sand Hill, as amended,  is due
         December  31,  2006,  accrues  interest at 18% per annum,  and requires
         interest  payments on July 1, 2006,  October 1, 2006 and  December  31,
         2006, as well as mandatory  principal payments as follows:  $150,000 by
         April 7, 2006,  $100,000 by May 15,  2006,  $500,000 by June 30,  2006,
         $500,000  by  September  30,  2006,  25% of the  proceeds  from any OEM
         agreements,  and  15% of  the  proceeds  of any  sale  of  equity  over
         $3,000,000 by December 31, 2006. To June 30, 2006,  the Company has not
         made all scheduled  principal and interest payments.  Sand Hill has not
         taken action to demand repayment of the note as a result of the events.

         The note for $2,500,000  made payable to BSGL is due December 31, 2007,
         accrues  interest  at the prime  rate  plus 2% per  annum and  requires
         mandatory principal payments as follows:  10% of the net proceeds of an
         anticipated  issuance by the Company of securities or convertible  debt
         for an aggregate  issuance price of not less than $5,000,000 (the "PIPE
         Transaction"),  $375,000 on December  31,  2006,  $375,000 on March 31,
         2007,  $375,000 on June 30, 2007,  $375,000 on September 30, 2007,  and
         the remaining  outstanding  principal  balance on December 31, 2007. If
         the  operating  income  generated  by the ServGate  products  equals or
         exceeds  $2,000,000 for the fiscal year ended  December 31, 2006,  then
         the note is to be paid by January 31, 2007. Interest is to be paid upon
         maturity  by issuing  common  stock at a per share  price  equal to the
         lesser of (i) the PIPE  Transaction  Price and (ii) the current  market
         price on the maturity date.

         BSGL can  convert the  principal  amount of the note into shares of the
         Company's common stock at any time. BSGL must convert the $1,000,000 of
         the  principal  amount  of the note if the  revenue  from the  ServGate
         products does not equal or exceed  $5,000,000  for the one-year  period
         commencing April 4, 2006. In either case,  conversion would be at a per
         share price equal to the lesser of (i) the PIPE  Transaction  Price and
         (ii) the current market price on the conversion date.

         Pursuant  to the terms of the  Agreement,  as part of the  Closing  the
         Company issued  9,000,000  shares of its Common Stock to BSGL, LLC. The
         shares were issued in reliance on the exemption  from the  registration
         requirements  of the  Securities  Act of 1933 (the  "Act")  pursuant to
         Section  4(2)  thereof.  The  issuance of the shares was  pursuant to a
         negotiated   transaction   not   involving  a  public   offering.   The
         certificates   representing  the  shares  bear  a  restrictive   legend
         prohibiting the sale of the shares in violation of the Act.


                                      F-20
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================


11.  SUBSEQUENT EVENTS (CONTINUED):

         The Company also issued a warrant to purchase stock to Sand Hill, which
         entitles Sand Hill to purchase, until April 3, 2013 at $0.01 per share,
         a number  of shares of  common  stock  equal to 10% of the  outstanding
         capital  stock  of the  Company  on a  fully  diluted  basis,  assuming
         exercise of all stock  options,  warrants and rights to acquire  stock;
         conversion  of all debt or other  instruments  convertible  into equity
         securities;  and  conversion  of all  preferred  stock of other  equity
         securities  into common stock,  with the  calculation  to be made as of
         April 3, 2006 after giving effect to the asset acquisition transaction.

     c)  Conversion of certain Series B preference shares:

         In June 2006, the Company  authorized the issuance of 50,000,000 shares
         of its common stock as partial conversion of certain outstanding Series
         B 5% Redeemable,  Convertible  Preferred Stock (the "Preferred Stock").
         Holders of 1,550  shares of Preferred  Stock,  having a stated value of
         $1,550,000,  agreed to convert  their  shares of  Preferred  Stock into
         155,000,000 shares of common stock; however, the Company authorized the
         issuance  of only  50,000,000  shares of common  stock as a result of a
         planned reverse stock split.

     d)  Information statement:

         On July 10, 2006, the Company filed a preliminary information statement
         pursuant  to  Section 14 of the  Securities  Exchange  Act of 1934,  as
         amended, and Regulation 14C and Schedule 14C thereunder,  in connection
         with  certain  actions to be taken  pursuant to the written  consent of
         stockholders holding a majority of the Company's  outstanding shares of
         common stock.  These actions,  anticipated  to be effective  August 31,
         2006, are as follows:

         i)   To change the Company's name to Amarium Technologies Inc.;

         ii)  To effect a 1 for 65 reverse stock split, whereby each stockholder
              shall receive 1 shares for every 65 shares owned;

         iii) To increase  the number of authorized  shares of common stock from
              100,000,000 to 500,000,000; and

         iv)  To amend the  Company's Stock  Option Plan to decrease  the number
              of options  authorized  for issuance to the  greater of 300,000 or
              10% of the  outstanding  number of shares at the end the Company's
              last  completed  fiscal  quarter,  and  such   number   shall   be
              automatically adjusted at the beginning of each fiscal quarter.



                                      F-21
<PAGE>
CIROND CORPORATION

Notes to Consolidated Financial Statements

(Expressed in United States dollars)

Years ended December 31, 2005 and 2004

================================================================================

12.  REVENUE:

     The Company's revenue from its various product families is as follows:


     ===========================================================================
                                                  2005               2004
     ---------------------------------------------------------------------------

     Winc products                         $    44,910        $   118,525
     AirPatrol products                         67,858             43,280
     Source code license and support             5,874            794,126

     ---------------------------------------------------------------------------
                                           $   120,642        $   955,931
     ===========================================================================



















                                      F-22