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

                                  FORM 10-KSB/A
                                (Amendment No. 1)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 2004

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

            For the transition period from __________ to __________

                        Commission file number 000-50029


                                VOICE DIARY INC.
                 (Name of small business issuer in its charter)


               DELAWARE                             73-1629948
    (State or other jurisdiction of              (I.R.S. Employer
     incorporation or organization)              Identification No.)


             200 Robbins Lane, P.O. Box 30, Jericho, New York 11753
               (Address of principal executive offices) (Zip Code)


         Issuer's telephone number, including area code: (516) 939-0400

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: Class A Common
Stock, par value $.01 per share.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES |X| NO |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and none 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. |X|

The issuer's revenues for its most recent fiscal year were: $2,547.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the issuer 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 April 8, 2005 (a date within the past 60 days) was $665,418.

At April 1, 2005, the registrant had outstanding 10,022,977 shares of par value
$.01 Class A Common Stock and 744 shares of par value $.01 Class B Common Stock.

Transitional Small Business Disclosure Format (check one):  YES |_| NO |X|
<PAGE>

Rider A

                                EXPLANATORY NOTE

      Due to human error, Voice Diary's annual report on Form 10-KSB filed on
April 15, 2005, was filed prematurely; the Form 10-KSB (including the financial
statements therein) had not yet been approved by the Company's audit committee
and the Company's auditors had not yet issued their auditors' report on the
financial statements for the year ended December 31, 2004. Consequently, the
Form 10-KSB filed on April 15, 2005, should be disregarded; it has been replaced
by this Form 10-KSB/A.
<PAGE>

                                TABLE OF CONTENTS


                                     PART I

ITEM 1  DESCRIPTION OF BUSINESS ...............................................3
ITEM 2  DESCRIPTION OF PROPERTY ...............................................4
ITEM 3  LEGAL PROCEEDINGS .....................................................5
ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...................5


                                     PART II

ITEM 5  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
            ISSUER PURCHASES OF EQUITY SECURITIES STOCKHOLDER MATTERS .........5
ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION .............7
ITEM 7  FINANCIAL STATEMENTS .................................................12
ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURE ...........................12
ITEM 8A CONTROLS AND PROCEDURES ..............................................12


                                    PART III

ITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ................13
ITEM 10 EXECUTIVE COMPENSATION ...............................................14
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .......14
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................15
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K .....................................16
ITEM 14 CONTROLS AND PROCEDURES ..............................................16
        SIGNATURES ...........................................................17
<PAGE>

                                VOICE DIARY INC.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

      We were incorporated in Delaware on February 26, 2002. In June and July
2002 we acquired approximately 99.81% of the outstanding shares of Voice Diary
Ltd., an Israeli corporation ("VDL"), through a purchase of shares from the
former controlling stockholder of VDL and an exchange of shares of our Company
with former stockholders of VDL.

      Under generally accepted accounting principles, the transaction was
accounted for as reorganization under common control, and accordingly the
financial statements represent the consolidated financial position, operating
results and cash flows of the Company and VDL for all periods from inception of
VDL. VDL began operations in October 1993 and has been in the development stage
since. (Unless otherwise indicated, references to us include VDL.)

THE BUSINESS OF VDL

      VDL developed several models of a PDA for the blind and visually impaired.
The latest model, the IMP, was introduced to the market in December 2001. To
date we have sold some 4,500 units of our PDAs for revenues of about $700,000.

      With the emergence of cellular telephones the feature set of our PDAs
became less than satisfactory and users now are reluctant to carry a PDA in
addition to their cellular telephone. Thus our market has weakened and as a
result we have ceased production of our PDAs. We have no inventory left of
products or components.

      In August 2004 we decided to temporarily suspend operations of VDL until
it reaches settlement with the Industrial Development Bank of Israel Ltd
("IDBI") and other creditors. See Item 3: Legal Proceedings.

THE CARDIOGSM AND THE VOICEPILOT

      In 2003 we received a $3,000,000 order to provide 10,000 units of a GSM
cellular phone that has an integrated EKG (ECG) device (the "CardioGSM"). For
the development of the CardioGSM we acquired in 2004 non-exclusive licensing
rights to patents that cover claims regarding a portable vital-signs monitor -
the technology necessary for the CardioGSM. Based on the CardioGSM, we intended
to develop a new product for the blind and visually impaired market: a cellular
phone with a voice PDA embedded, the "VoicePilot".

      However, the order expired on December 31, 2004, because we failed to
raise the $1,000,000, necessary to execute the development of the CardioGSM. As
a result we have abandoned our plans to develop the CardioGSM and the
VoicePilot.


                                       3
<PAGE>

NIR-OR

      In 2004 we negotiated with Nir-Or Israel Ltd. ("Nir-Or") regarding our
acquiring the business of Nir-Or. Nir-Or is an Israeli aerospace and defense
company founded in 1986. Its main products include display systems for airborne,
naval, and land platforms for command and control applications in harsh
environments. A final agreement with Nir-Or was to have been signed by December
31, 2004, but the signing was postponed and we currently believe that the
acquisition is not likely to be consummated.

      The shareholders of Nir-Or are also major shareholders in our Company. Mr.
Nathan Tarter, who is the president of Nir-Or and holds two thirds of its
outstanding shares, is one of our directors and holds approximately 13% of our
outstanding shares. Mr. Ofer Yonach, who is director and chief financial officer
of Nir-Or and holds a third of its outstanding shares, holds approximately 20%
of our outstanding shares.

MERGERS OR ACQUISITIONS

      We are now looking at other strategic acquisitions or mergers with
companies that can benefit from our core technologies and business experience to
develop jointly applications of our proprietary know-how. During 2004, we signed
consulting agreements with several consultants to help us locate potential
companies for mergers, acquisitions or other forms of cooperation, as well as to
help us with other financial and business decisions. As a result there have been
some discussions in this direction but we can make no assurances that we will be
able to complete any such transactions on terms favorable to us or to our
shareholders.

      We have granted the consultants with stock options that have been
exercised.

OPERATIONS

      In the past, our research and development was conducted mostly by our own
team, located in Israel. We have stopped our research and development in 2002
because we lack the financial resources necessary for this activity.

      Our manufacturing was mostly done through sub-contractors in Israel or in
the Far East. Currently we are not manufacturing any products.

      As a result of our unclear direction and lack of financial resources, we
have reduced our staff and currently our only employee is our president.

ITEM 2. DESCRIPTION OF PROPERTY

      Our facilities include an office space of approximately 120 square feet at
Jericho NY. The lease is in Jericho, New York. We lease these premises rent
free, under an oral arrangement with our US distributor. This arrangement may be
terminated immediately at any time. VDL no longer leases office space in Israel.


                                       4
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      The Industrial Development Bank of Israel Ltd., ("IDBI") is engaged in
court-ordered collection proceedings against VDL for non-payment of debt. The
sum claimed is approximately $250,000, including penalties and interest. The
entire amount has been accrued in our financial statements. In relation to the
pro-forma effect on our financial statements if VDL assets and liabilities are
liquidated as a result of receivership see notes 6 and 7 to the financial
statements. IDBI is also engaged in court-ordered collection proceedings against
our president, who has personally guaranteed approximately $50,000 of the debt
of VDL. Under these proceedings the Enforcement of Judgment Office ruled that
our president is not allowed to leave Israel until he settles his debt. We
intend to negotiate a settlement with IDBI upon completion of our next
financing. If we fail to raise more money this may lead to the appointment of
receiver for VDL and will restrain our president from being fully engaged in the
development of our business.


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

      Not applicable.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL ISSUER
PURCHASES OF EQUITY SECURITIES

      On June 22, 2004, our Class A Common Stock was approved for listing on the
Over-the-Counter Bulletin Board. Our symbol is VDYI.

      The following table sets forth the range of high and low closing prices
for our common stock for each quarterly period indicated, as reported by brokers
and dealers making a market in the capital stock. These quotations reflect
inter-dealer prices without retail markup, markdown or commission, and may not
necessarily represent actual transactions.

                            Closing prices
                    -----------------------------
                      High                Low
                    ---------          ----------
Q3 2004               $0.64              $0.01
Q4 2004               $0.80              $0.19
Q1 2005               $0.30              $0.05


                                       5
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

      In May 2003, our stockholders approved the 2003 Stock Option Plan (the
"Plan") for the grant of stock options and stock purchase rights to employees
and to service providers and incentive stock options to employees. The maximum
aggregate number of shares subject to the Plan is 1,000,000 shares of Class A
Common Stock. Under this plan 975,941 options were granted and all were
exercised.

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                                            Number of
                                                                                            securities
                                                                                            remaining
                                                          Number of                         available for
                                                          securities to                     future issuance
                                                          be issued       Weighted          under equity
                                                          upon exercise   average           compensation
                                                          of              exercise price    plans
                                                          outstanding     of outstanding    (excluding
                                                          options,        options,          securities
                                                          warrants and    warrants and      reflected in
                                                          rights          rights            column (a)
                                                               (a)            (b)                 (c)
<S>                                                       <C>             <C>               <C>
Equity compensation plans approved by security
   holders..............................................        0                --             24,059
Equity compensation plans not approved by security
   holders..............................................        0                --                  0
              Total ....................................        0                --             24,059
</TABLE>

DIVIDEND POLICY

      We have not declared or paid any cash dividends on our Common Stock since
our formation, and do not presently anticipate paying any cash dividends on our
Common Stock in the foreseeable future. We currently intend to retain any future
earnings to finance the expansion and development of our business. The future
payment of cash dividends on the Common Stock will depend on our earnings,
capital requirements and financial position, applicable requirements of the
Delaware General Corporation Law, general economic conditions and other factors
considered relevant by our board of directors.

      There are no contractual restrictions on our ability to declare and pay
dividends.

REPORTS TO SECURITIES HOLDERS

      The public may read and copy any materials we file with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. We are an electronic filer with the SEC,
which maintains an Internet site containing reports, proxy and information


                                       6
<PAGE>

statements, and other information regarding issuers that file electronically
with the Commission; the address of the SEC web site is http://www.sec.gov. You
are welcome to access our web site at www.voicediary.com.

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

FORWARD LOOKING STATEMENTS

      Certain statements in this report, including statements of our
expectations, intentions, plans and beliefs, including those contained in or
implied by "Management's Discussion and Analysis" and the Notes to Consolidated
Financial Statements, are "forward-looking statements", within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that are subject to certain events, risks and uncertainties that may be
outside our control. The words "believe", "expect", "anticipate", "optimistic",
"intend", "will", and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are made. The Company
undertakes no obligation to update or revise any forward-looking statements.
These forward-looking statements include statements of management's plans and
objectives for our future operations and statements of future economic
performance, information regarding our expansion and possible results from
expansion, our expected growth, our capital budget and future capital
requirements, the availability of funds and our ability to meet future capital
needs, the realization of our deferred tax assets, and the assumptions described
in this report underlying such forward-looking statements. Actual results and
developments could differ materially from those expressed in or implied by such
statements due to a number of factors, including, without limitation, those
described in the context of such forward-looking statements, our expansion and
acquisition strategy, our ability to achieve operating efficiencies, our
dependence on network infrastructure, capacity, telecommunications carriers and
other suppliers, industry pricing and technology trends, evolving industry
standards, domestic and international regulatory matters, general economic and
business conditions, the strength and financial resources of our competitors,
our ability to find and retain skilled personnel, the political and economic
climate in which we conduct operations and the risk factors described from time
to time in our other documents and reports filed with the Securities and
Exchange Commission (the "Commission"). Additional factors that could cause
actual results to differ materially from the forward-looking statements include,
but are not limited to: 1) our ability to successfully develop, manufacture and
deliver the CardioGSM to Natali Ltd. on a timely basis and in the prescribed
condition; 2) our ability to compete effectively with other companies that
provide emergency homecare products to cardiac patients; 3) our ability to
continue to develop and market products to the blind and visually impaired; 4)
our ability to raise sufficient capital in order to effectuate our business
plan; and 5) our ability to retain our key executives.

CRITICAL ACCOUNTING POLICIES

Stock-based compensation

      Employee stock-based compensation is accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and the FASB interpretations thereof. Pursuant to those


                                       7
<PAGE>

accounting pronouncements, compensation is recorded for share options granted to
employees at the date of grant based on the difference between the exercise
price of the options and the market value of the underlying shares at that date.
Due to the terms of the grants, the fair value of the compensation in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation" approximates the
values computed in accordance with APB No. 25. Stock-based compensation to
non-employees is accounted for in accordance with SFAS No. 123.

      Under both accounting pronouncements, as part of the necessary
computations, management is required to estimate the fair value of the
underlying shares. Fair value has generally been determined by management as the
price at which the Company's shares were issued at the most recent prior
placement of the Company's Common Stock. The timing of the grant and measurement
of stock-based awards could have a material effect on the Company's results of
operations and financial position.

Revenue recognition

      The Company's revenues currently derive solely from a low volume of
product sales at standard terms which are recognized, in accordance with
generally accepted accounting principles, upon shipment of its products to the
customer provided that persuasive evidence of an arrangement exists, title has
transferred, the price is fixed, collection of resulting receivables is probable
and there are no remaining significant obligations. Future results of operations
may be affected by the nature of the products that may be developed and marketed
in the future by the Company and by the terms to be included in the sales
agreements. Such matters may have a significant impact on the timing of the
Company's revenue recognition at each reporting date.

Development stage enterprise

      The Company is in the development stage and has not generated significant
revenues.

Going concern issue

      The Company's financial statements have been prepared assuming that it
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company has an accumulated deficit at December 31, 2004 of $3,220,593, a working
capital deficit at December 31, 2004 of $573,640 and accumulated negative cash
flow used in operation activity of $2,010,543 that raise substantial doubt about
its ability to continue as a going concern. In addition, since the second half
of 2002, the company's operations were carried out with a significantly reduced
staff. The ability of the Company to continue as a going concern is dependent
upon the successful completion of the Company's development program and,
ultimately, the attainment of profitable operations which are contingent upon
future events, including maintaining adequate financing to fulfill its
development activities, and achieving a level of sales adequate to support the
Company's expense structure. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                                       8
<PAGE>

FINANCIAL BACKGROUND

      From our inception through 1998, we were financed by an aggregate of
approximately $780,000 in equity investments made by a group of Israeli
investors. During this period VDL received about $700,000 in grants for research
and development and for marketing. See Note 8 to the Company's consolidated
financial statements for information concerning disputes between VDL and the
Chief Scientist and Note 5 for the payback of part of the Marketing Fund grant.

      Towards the end of the first quarter of 1999 a dispute with our founder
and former president resulted in all the above funding sources were no longer
available. In January 2000 VDL began a relationship with Aryt Industries Ltd.
("Aryt"), which culminated in Aryt providing the Company from January 2000 to
March 2002 with loans aggregating approximately to $0.65 million. VDL allocated
to Aryt shares in consideration of the loans.

      In June 2002, Aryt and our Company agreed, in connection with our
acquisition of VDL, that all of Aryt's shares of VDL be transferred to us for
$1.00 and the loans and all other debts payable by VDL to Aryt be extinguished.
In return, VDL agreed to pay Aryt, on a quarterly basis, royalties on VDL sales
up to an aggregate amount of $751,000. See Note 8 to the financial statements.
VDL has not yet paid any royalties to Aryt. The royalties that VDL owes Aryt
amount to approximately $10,000. In addition, VDL failed to meet payments to
Aryt for components supplied for manufacturing of the IMP in the amount of
approximately $26,000. All VDL's debt to Aryt is allocated in our consolidated
financial statements.

      From July 2002 to September 2003 several Israeli investors invested in us
a total of $200,000 in consideration for 4,039,214 shares of Class A Common
Stock. The investment was made pursuant to Regulation S under the Securities Act
of 1933, as amended. The investors were led by Ofer Yonach and Nathan Tarter,
the principals of Nir-Or. Nathan Tarter became a director in our Company. During
this period we also provided services to Nir-Or for $29,000.

      In May 2003, we filed a registration statement with the Securities
Exchange Commission (the "SEC") to register 2,400,000 shares of Class A Common
Stock to be offered to the public, 2,726,470 shares of Class A Common Stock to
be offered by selling shareholders, 1,000,000 shares of Class A Common Stock to
be issued pursuant to a stock option plan for employees and suppliers, and
1,618,885 shares of Class A Common Stock to be issued upon the conversion of
Class B Common Stock. The registration statement became effective in June 2003.
The offering was closed on December 15, 2003. The Company sold to the public
2,297,257 shares of Class A Common Stock at a price of $0.07. 1656 shares of the
Class B Common Stock were converted into 1,618,885 shares of Class A Common
Stock.

      On July 20, 2004, the Company filed a registration statement on Form S-8
to register 1,000,000 shares of Class A Common Stock to be issued upon exercise
of options granted under the Company's 2003 Stock Option Plan. During 2003 and
2004 975,941 of the options were granted to members of the advisory board and to
other consultants. All the options were exercised during 2004; the exercise
prices ranged from $0.01 to $0.25.


                                       9
<PAGE>

RESULTS OF OPERATION

      The following discussion of the financial condition and results of
operations of our Company should be read in conjunction with the consolidated
financial statements and the notes thereto included in this annual report.

Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003

      Our revenues in fiscal year 2004 were negligible. The reason is that we
stopped manufacturing and marketing of the IMP and we had no new product to
introduce to the market. We had no research and development activity, which was
in fact terminated in 2003.

      Marketing, general and administrative expenses increased by $141,141 (75%)
in fiscal year 2004 compared to the previous year due to the issuance of stock
options granted for advisors services.

      In fiscal year 2004 we had net financial expenses of $134,960. In 2003 we
had financial expenses of $45,541. The increase in financial expenses was due to
interest and penalties accrued on our debt to IDBI.

      Our net loss for fiscal year 2004 increased by $272,599 (129%) compared to
fiscal year 2003. The increase is primarily due to the decrease in our revenues,
the issuance of stock options and financial expenses of short term loan.

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002

      Our revenues increased by $48,884 (approximately 143%) in the fiscal year
2003 over the fiscal year 2002. The reason for this increase was that we had
repeat sales of the IMP.

      In fiscal year 2003 our gross profit was $32,178. In fiscal year 2002 we
had gross loss of $25,407. The gross profit in fiscal year 2003 was due to the
decrease in manufacturing expenses that resulted from the general decrease in
our operating budget.

      Research and development expenses decreased by $131,722 in fiscal year
2003 over fiscal year 2002. This was a result of our ending all our research and
development work after the first quarter of 2003.

      Marketing, general and administrative expenses decreased by $140,648
(approximately 43%) in fiscal year 2003 compared to the previous year due to the
decrease in our marketing activity and other expenses as we downsized our
operation because of our financial situation.

      In fiscal year 2003 we had net financial expenses of $45,541. In 2002 we
had financial expenses of $142,327. Most of the expenses in fiscal year 2002
($98,000) were related to amortization of our debt to Aryt.

      Our net loss in fiscal year 2003 decreased by $398,446 (approximately 65%)
from fiscal year 2002. The decrease is primarily due to the decrease in all our
expenses and the increase in our sales.

Liquidity

      We have no financial resources to continue our operations. Our operating
budget is about $12,000 a month. To continue operations we must raise money


                                       10
<PAGE>

immediately and we intend to do so either through short term borrowings or
private placements. We expect to be able to obtain a short term loan that will
enable us to pay our expected expenses until the end of the second quarter of
2005 and settle the debt of VDL with The Industry Development Bank of Israel. If
we will not be able to raise money we are facing the risk of being unable to
continue our operations.

      Ultimately, our ability to continue as a going concern will depend upon
our ability to achieve and maintain profitability in the sale of our products.
As stated in the financial statements included in this annual report, our
recurring losses from operations, negative working capital, shareholders'
deficiency and negative cash flows and the court ordered collection proceedings
against the subsidiary for non-payment of its loan amounting to approximately
$250,000 raise substantial doubt about our ability to continue as a going
concern. We had a deficit in working capital of $573,640 as of December 31,
2004.

Capital Resources

      As of the date of this report we have no material commitments for capital
expenditures.

      In August 2001 we received a loan in the amount of approximately $102,000
from the Industrial Development Bank of Israel Ltd., ("IDBI"). The loan was
payable in 36 equal monthly payments of $2,800 starting in September 2002. The
loan bears interest at the rate of LIBOR plus 4% per annum paid monthly. IDBI
holds a lien on substantially all the assets of VDL. Since September 2002 we
have been in default on our payments. See Item 3: Legal Proceedings regarding
actions taken by IDBI against VDL and our President.

Disclosures About Contractual Obligations as of December 31, 2004

<TABLE>
<CAPTION>
                                          Payments Due by Period
                                          ----------------------
   Contractual                     Less than
   Obligations        Total          1 Year          1-3 Years      4-5 Years     After 5 Years
   -----------        -----          ------          ---------      ---------     -------------
<S>                  <C>            <C>               <C>            <C>             <C>
Short Term Debt      $250,000       $250,000          $     --       $     --        $     --
Royalties (1)        $751,000       $     --          $250,000       $250,000        $251,000
</TABLE>

(1) Based on sales volume. See "Financial Background" above.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to market risk from changes in interest rates and foreign
currency exchange rates which may adversely affect our results of operations and
financial condition. Our policy is not to use financial instruments for trading
purposes or other speculative purposes. We do not use any derivative contracts
or other financial instruments to manage risk.

      We are exposed to foreign exchange risk to the extent of adverse
fluctuations in the U.S. dollar. Based on historical U.S. currency movement, we
do not believe that reasonably possible near-term changes in the U.S. dollar of
10% will result in a material effect on our future earnings, financial position
or cash flows.

      We are exposed to financial risks resulting from changes in the exchange
rate between the U.S. dollar and the Israeli new shekel, changes in the prime
interest rate in Israel and changes in the LIBOR. In the previous years about


                                       11
<PAGE>

85% of our revenues were received in U.S. dollars (39% in 2004). All of our debt
is linked to the U.S. dollar exchange rate and bears interest based on LIBOR.
Most of our expenses are linked to the U.S. dollar exchange rate. The effect of
currency exchange rate fluctuations on our financial results is included in
financial expenses (income) net.

      The following table provides information about our debt obligations which
are sensitive to changes in interest rates at December 31, 2004. The information
is the principal cash flows and weighted interest rates by expected maturity
dates.

      Short-term debt (in U.S. dollars)

                                                      2004
                                                  ------------

              Variable rate (in U.S. dollars)        $250,310
                                Interest rate       LIBOR + 4%

                                                  -----------
                                                     $250,310
                                                  ===========

ITEM 7. FINANCIAL STATEMENTS

      The financial statements required by this item begin on page F-1 following
this page.

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

      None.

ITEM 8A. CONTROLS AND PROCEDURES

      Based on his evaluation of the effectiveness of our disclosure controls
and procedures as of December 31, 2004, our president and chief executive
officer has concluded that our disclosure controls and procedures are effective
and sufficient to ensure that we record, process, summarize, and report
information required to be disclosed by us in our periodic reports.

      Subsequent to the date of his evaluation, there have not been any
significant changes in our internal controls or in other factors that could
significantly affect these controls, including any corrective action with regard
to significant deficiencies and material weaknesses.


                                       12
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                       CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2004


                                       F1
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)

                 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                                                                                    <C>
INDEPENDENT AUDITORS' REPORT                                                            F3

CONSOLIDATED FINANCIAL STATEMENTS:

 Consolidated Balance Sheets as of December 31, 2004 and 2003                           F4

 Consolidated Statements of Operations for the years ended December 31, 2004,
 2003 and 2002 and the cumulative period from October 1, 1993 (date of
 commencement of operations) to December 31, 2004                                       F5

 Statement of Shareholders' Deficiency for the period from October 1, 1993 (date
 of commencement of operations) to December 31, 2004                                  F6 - F9

 Consolidated Statements of Cash Flows for the years ended December 31, 2004,
 2003 and 2002 and the cumulative period from October 1, 1993 (date of
 commencement of operations) to December 31, 2004                                    F10 - F11

 Notes to the Consolidated Financial Statements                                      F12 - F29
</TABLE>


                                       F2
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders of
Voice Diary Inc.

We have audited the accompanying consolidated balance sheets of Voice Diary Inc.
(a development stage company) ("the Company") and its subsidiary as of December
31, 2004 and 2003, and the related consolidated statements of operations,
shareholders' deficiency and cash flows for each of the three years in the
period ended December 31, 2004 and for the cumulative period from October 1,
1993 (date of commencement of operations) to December 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
its subsidiary as of December 31, 2004 and 2003, and their consolidated results
of operations and their consolidated cash flows for each of the three years in
the period ended December 31, 2004 and for the cumulative period from October 1,
1993 to December 31, 2004, in conformity with U.S. generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 6 to the
financial statements, the Company's recurring losses from operations, working
capital deficit, shareholders' deficiency and negative cash flows and the court
ordered collection proceedings against the Subsidiary for non-payment of its
loan amounting to approximately $250,000 raise substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


Brightman Almagor & Co.,
Certified Public Accountants
A member firm of Deloitte Touch Tohmatsu
Haifa, Israel
April 26, 2005


                                       F3
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       December 31
                                                                                ---------------------------
                                                                                  2 0 0 4        2 0 0 3
                                                                                ------------   ------------
<S>                                                                             <C>            <C>
CURRENT ASSETS
Cash and cash equivalents                                                       $     18,755   $      3,340
Proceeds from public offering                                                             --        160,500
Trade accounts receivable                                                                 20          1,158
Other receivables and prepaid expenses (Note 3)                                        7,788          4,526
Inventory                                                                                 --          3,168
                                                                                ------------   ------------
                                                                                      26,563        172,692
                                                                                ------------   ------------

FIXED ASSETS, NET (Note 4)                                                                --         28,913
                                                                                ------------   ------------

                                                                                ------------   ------------
                                                                                $     26,563   $    201,605
                                                                                ============   ============
CURRENT LIABILITIES
Bank loans (Note 6)                                                             $    250,310   $    125,541
Trade accounts payable                                                                51,085         58,867
Accrued expenses                                                                     229,133        243,320
Bridge loan                                                                            8,619          8,452
Other payables (Note 5)                                                               61,056         83,290
                                                                                ------------   ------------
                                                                                     600,203        519,470
                                                                                ------------   ------------

LONG TERM LIABILITIES
Liabilities for severance pay (Note 5B)                                                   --         11,690
                                                                                ------------   ------------

COMMITMENTS (Note 8)

SHAREHOLDERS' DEFICIENCY (Note 9)
Share capital:
Shares of Class A Common Stock $0.01 par value
(Authorized - 20,000,000 shares. Issued and Outstanding - 10,022,977 shares
as of December 31, 2004 and 9,047,036 shares as of December 31, 2003)                100,229         90,470
Shares of Class B Common Stock $ 0.01 par value
(Authorized - 8,344 shares, Issued and Outstanding - 744 shares)                           7              7
Additional paid-in capital                                                         2,552,374      2,320,745
Subscription receivable                                                               (5,657)        (3,848)
Deficit accumulated during the development stage                                  (3,220,593)    (2,736,929)
                                                                                ------------   ------------
                                                                                    (573,640)      (329,555)
                                                                                ------------   ------------

                                                                                ------------   ------------
                                                                                $     26,563   $    201,605
                                                                                ============   ============
</TABLE>

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


                                       F4
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                           Cumulative from
                                                                                           October 1, 1993
                                                                                              (date of
                                                                                            commencement
                                                                                           of operations)
                                                    Year ended December 31                 to December 31,
                                     --------------------------------------------------    --------------
                                         2 0 0 4           2 0 0 3           2 0 0 2           2 0 0 4
                                     --------------    --------------    --------------    --------------
<S>                                  <C>               <C>               <C>               <C>
Revenues (Note 10)                   $        2,547    $       82,886    $       34,002    $      726,396

Cost of revenues (Note 11)                    3,979            50,708            59,409           635,929
                                     --------------    --------------    --------------    --------------

Gross profit (loss)                          (1,432)           32,178           (25,407)           90,467

Operating costs and expenses

Research and development
 expenses (Note 12)                              --            10,859           142,581         1,125,553

Marketing, general and
 administrative expenses
 (Note 13)                                  329,629           188,488           329,136         1,661,546

Operating loss                             (331,061)         (167,169)         (497,124)       (2,696,632)

Financial expenses, Net (Note 14)           134,960            45,541           142,327           569,211

Financial income                                 --                --              (582)          (30,162)

Other loss (income), net (Note 15)           17,643            (1,645)          (29,358)          (15,088)
                                     --------------    --------------    --------------    --------------

Loss for the period                  $     (483,664)   $     (211,065)   $     (609,511)   $   (3,220,593)
                                     ==============    ==============    ==============    ==============

Loss per share:
Basic and diluted                    $        (0.05)   $        (0.06)   $        (0.96)
                                     ==============    ==============    ==============

Number of shares used in
   computing basic and
 diluted loss per share                   9,409,486         3,764,961           637,263
                                     ==============    ==============    ==============
</TABLE>

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


                                       F5
<PAGE>

                                VOICE DIARY INC.
                          A DEVELOPMENT-STAGE COMPANY)
                      STATEMENT OF SHAREHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
                                   Number of Shares       Number of Shares
                                ----------------------  ---------------------                            Deficit
                                                                                                        accumulated
                                                         Class A     Class B                 Additional  during the       Total
                                 Common      Preferred   Common      Common        Share       paid-in   development  shareholders'
                                  Stock        Stock      Stock       Stock       Capital      capital      stage       deficiency
                                ---------    ---------  ---------   ---------    ---------    ---------   ---------    ---------
<S>                             <C>          <C>        <C>         <C>         <C>          <C>         <C>          <C>
Balance--October 1, 1993 (date
of commencement of operations)        --           --         --          --           --           --          --           --

Changes in 1993:

Issuance of Common Stock          15,000                                        $     527    $  45,736                $  46,263

Net income for the year                                                                                      1,209        1,209
                               ---------    ---------  ---------   ---------    ---------    ---------   ---------    ---------

Balance- December 31, 1993        15,000                                              527       45,736       1,209       47,472

Changes in 1994:

Loss for the year                                                                                          (51,609)     (51,609)
                               ---------    ---------  ---------   ---------    ---------    ---------   ---------    ---------

Balance- December 31, 1994        15,000                                              527       45,736     (50,400)      (4,137)

Changes in 1995:

Issuance of Common Stock           1,200                                               39       43,647                   43,686

Loss for the year                                                                                          (99,244)     (99,244)
                               ---------    ---------  ---------   ---------    ---------    ---------   ---------    ---------

Balance- December 31, 1995        16,200                                              566       89,383    (149,644)     (59,695)

Changes in 1996:

Issuance of Common Stock           8,800                                              273      224,089                  224,362

Loss for the year                                                                                         (147,481)    (147,481)
                               ---------    ---------  ---------   ---------    ---------    ---------   ---------    ---------

Balance- December 31, 1996        25,000                                              839      313,472    (297,125)      17,186

Changes in 1997:

Issuance of Common Stock           8,160                                              236      265,789                  266,025

Loss for the year                                                                                         (405,106)    (405,106)
                               ---------    ---------  ---------   ---------    ---------    ---------   ---------    ---------

Balance- December 31, 1997        33,160           --         --          --    $   1,075    $ 579,261   $(702,231)   $(121,895)
                               =========    =========  =========   =========    =========    =========   =========    =========
</TABLE>

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


                                       F6
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                  STATEMENT OF SHAREHOLDERS' DEFICIENCY (CONT.)

<TABLE>
<CAPTION>
                                      Number of Shares     Number of Shares
                                    -------------------   ------------------                               Deficit
                                                                                                         accumulated
                                                           Class A   Class B              Additional     during the       Total
                                     Common    Preferred   Common    Common    Share       paid-in       development   shareholders'
                                      Stock      Stock     Stock     Stock    Capital      capital          stage       deficiency
                                    ---------   -------   --------   -------  --------    -----------    -----------   ------------
<S>                                 <C>         <C>       <C>        <C>      <C>         <C>            <C>            <C>
Balance- December 31, 1997             33,160        --         --       --   $  1,075    $   579,261    $  (702,231)   $ (121,895)

Changes in 1998:

Issuance of Common Stock               87,480                                    2,275        199,838                      202,113

Issuance of options to employees                                                                3,600                        3,600

Loss for the year                                                                                           (278,459)     (278,459)
                                    ---------   -------   --------   ------   --------    -----------    -----------    ----------

Balance- December 31, 1998            120,640                                    3,350        782,699       (980,690)     (194,641)

Changes in 1999:

Issuance of Common Stock                7,630                                      179         21,757                       21,936

 Issuance of options to a related
   party                                                                                      161,970                      161,970

Issuance of options to employees                                                               37,894                       37,894

Loss for the year                                                                                           (359,975)     (359,975)
                                    ---------   -------   --------   ------   --------    -----------    -----------    ----------

Balance- December 31, 1999            128,270                                    3,529      1,004,320     (1,340,665)     (332,816)

Changes in 2000:

Issuance of Common Stock              213,718                                    5,238         48,210                       53,448

Issuance of Common Stock pursuant
  to financing agreement              300,000                                    7,317         66,722                       74,039

Issuance of options for services
  rendered                                                                                     30,145                       30,145

Issuance of options to a related
  party                                                                                        45,000                       45,000

Issuance of options to employees                                                                5,391                        5,391

Issuance of Preferred Stock                       2,400                              6             --                            6

Loss for the year                                                                                           (344,601)     (344,601)
                                    ---------   -------   --------   ------   --------    -----------    -----------    ----------
                                      641,988     2,400         --       --     16,090      1,199,788     (1,685,266)     (469,388)
Adjustment due to reorganization
  under common control               (641,988)   (2,400)   736,531    2,400     (8,701)        8,701                            --
                                    ---------   -------   --------   ------   --------    -----------    -----------    ----------

Balance- December 31, 2000                 --        --    736,531    2,400   $  7,389    $ 1,208,489    $(1,685,266)   $ (469,388)
                                    =========   =======   ========   ======   ========    ===========    ===========    ==========
</TABLE>

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

                                       F7
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                  STATEMENT OF SHAREHOLDERS' DEFICIENCY (CONT.)

<TABLE>
<CAPTION>
                                          Number of Shares
                                   ----------------------------                                       Deficit
                                                                                                    accumulated
                                    Class A     Class B               Additional                    during the       Total
                                    Common      Common    Share        paid-in      Subscription    development   Shareholders'
                                    Stock        Stock   Capital       capital       receivable        stage       deficiency
                                   ---------    ------   --------    -----------    ------------   ------------    ------------
<S>                                <C>          <C>      <C>         <C>            <C>            <C>             <C>
Balance- December 31, 2000           736,531     2,400   $  7,389    $ 1,208,489    $         --     (1,685,266)   $   (469,388)

Changes in 2001:

Cost related to previous year
  issuances                                                               (5,000)                                        (5,000)

Loss for the year                                                                                      (231,087)       (231,087)
                                   ---------    ------   --------    -----------    ------------   ------------    ------------

Balance- December 31, 2001           736,531     2,400      7,389      1,203,489              --     (1,916,353)       (705,475)

Changes in 2002:

Issuance of Common Stock              65,177                  652         64,525                                         65,177

Issuance of Common Stock
  pursuant to financing agreement     98,249                  982         97,267                                         98,249

Waiver of loan by Related Party                                          649,289                                        649,289

Waiver of shares by principal
  shareholder                       (265,094)              (2,650)         2,650                                             --

Issuance of options for services
  rendered                                                                25,000                                         25,000

Loss for the year                                                                                      (609,511)       (609,511)
                                   ---------    ------   --------    -----------    ------------   ------------    ------------

Balance December 31, 2002            634,863     2,400      6,373      2,042,220              --     (2,525,864)       (477,271)

Changes in 2003:

Issuance of Common Stock              72,000                  720           (720)                                            --

Issuance of options for services
  rendered                                                                 1,000                                          1,000

Regulation S offering              4,039,214               40,392        159,608                                        200,000

Issuance of Common Stock             384,817                3,848                         (3,848)                            --

Public issuance of Common Stock    2,297,257               22,972        137,836                                        160,808

Cost related to issuances                                                (61,360)                                       (61,360)

Conversion of stock                1,618,885    (1,656)    16,172        (16,172)                                            --

Waiver of management fees                                                 58,333                                         58,333

Loss for the year                                                                                      (211,065)       (211,065)
                                   ---------    ------   --------    -----------    ------------   ------------    ------------
Balance December 31, 2003          9,047,036       744   $ 90,477    $ 2,320,745    $     (3,848)  $ (2,736,929)   $   (329,555)
                                   =========    ======   ========    ===========    ============   ============    ============
</TABLE>

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


                                       F8
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                  STATEMENT OF SHAREHOLDERS' DEFICIENCY (CONT.)

<TABLE>
<CAPTION>
                                     Number of Shares                                               Deficit
                                   --------------------                                           accumulated
                                     Class A    Class B               Additional                  during the        Total
                                     Common     Common      Share       paid-in   Subscription    development    shareholders'
                                     Stock       Stock     Capital      capital    receivable        stage        deficiency
                                   ----------   -------   ---------   ----------  ------------    -----------    -----------
<S>                                <C>          <C>       <C>         <C>          <C>            <C>            <C>
Balance December 31, 2003           9,047,036       744      90,477    2,320,745      (3,848)      (2,736,929)      (329,555)

Changes in 2004:

Issuance of options for services
  rendered                                                               189,379                                     189,379

Exercise of options for services
  rendered                            975,941                 9,759       42,250      (1,809)                         50,200

Loss for the year                                                                                    (483,664)      (483,664)
                                   ----------   -------   ---------   ----------   ---------      -----------    -----------

Balance December 31, 2004          10,022,977       744   $ 100,236   $2,552,374   $  (5,657)     $(3,220,593)   $  (573,640)
                                   ==========   =======   =========   ==========   =========      ===========    ===========
</TABLE>

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


                                       F9
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                      Cumulative from
                                                                                                      October 1, 1993
                                                                                                         (date of
                                                                                                       commencement
                                                                                                      of operations)
                                                                   Year ended December 31             to December 31,
                                                       --------------------------------------------    ------------
                                                          2 0 0 4         2 0 0 3         2 0 0 2         2 0 0 4
                                                       ------------    ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>             <C>
CASH FLOWS - OPERATING ACTIVITIES
Loss for the period                                    $   (483,664)   $   (211,065)   $   (609,511)   $ (3,220,593)
Adjustments to reconcile loss to net
cash used in operating activities (Appendix A)              154,623         107,784         157,848       1,210,050
                                                       ------------    ------------    ------------    ------------
Net cash used in operating activities                      (329,041)       (103,281)       (451,663)     (2,010,543)
                                                       ------------    ------------    ------------    ------------

CASH FLOWS - INVESTING ACTIVITIES
Purchase of fixed assets                                         --              --         (33,713)       (156,239)
Escrow Deposit                                              160,500        (160,500)             --              --
Proceeds from sale of fixed assets                            3,070              --              --           5,573
                                                       ------------    ------------    ------------    ------------
Net cash provided by (used in)  investing activities        163,570        (160,500)        (33,713)       (150,666)
                                                       ------------    ------------    ------------    ------------

CASH FLOWS - FINANCING ACTIVITIES
Proceeds from long-term loans                                    --              --              --         210,858
Repayment of long-term loans                                     --         (17,410)        (26,128)       (114,397)
Short-term bank credit, net                                 124,769          11,587           1,949         148,454
Short-term loans from Related Party                              --              --         291,617         649,289
Bridge loan, net                                                167         (39,523)         47,975           8,619
Issuance of shares                                           55,950         299,448          65,177       1,277,141
                                                       ------------    ------------    ------------    ------------
Net cash provided by financing activities                   180,886         254,102         380,590       2,179,964
                                                       ------------    ------------    ------------    ------------

                                                       ------------    ------------    ------------    ------------
Increase (decrease) in cash and cash equivalents             15,415          (9,679)       (104,786)         18,755
Cash and cash equivalents - beginning of period               3,340          13,019         117,805              --
                                                       ------------    ------------    ------------    ------------
Cash and cash equivalents - end of period              $     18,755    $      3,340    $     13,019    $     18,755
                                                       ============    ============    ============    ============
</TABLE>

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


                                      F10
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                             Cumulative from
                                                                                                             October 1, 1993
                                                                                                                (date of
                                                                                                               commencement
                                                                                                              of operations)
                                                                        Year ended December 31                to December 31,

                                                                 2 0 0 4          2 0 0 3        2 0 0 2         2 0 0 4
                                                               ------------    ------------    ------------    ------------
<S>                                                           <C>              <C>             <C>             <C>
Appendix A -
Adjustments to reconcile loss to
net cash from operating activities

Income and expense items not
involving cash flows:

Depreciation and amortization                                  $      5,727    $      8,680    $      7,724    $    132,278
Exchange-rate (gain) loss                                                --           5,919          (3,149)          5,395
Liabilities for severance pay                                            --           5,474           4,455              --
Loss on sale of fixed assets                                         20,116              --              --          18,388
Waiver of management fees                                                --          25,000              --          58,333
Non-cash compensation expenses                                      183,629           1,000         123,249         662,190
                                                               ------------    ------------    ------------    ------------
                                                                    209,472          46,073         132,279         876,584
                                                               ------------    ------------    ------------    ------------

Changes in operating assets and liabilities:

Decrease (increase) in trade accounts receivable                      1,138           2,151          62,661             (20)
Decrease (increase) in other receivables and prepaid expenses        (3,262)          5,478          19,359          (7,788)
Decrease (increase) in inventories                                    3,168          (3,168)             --              --
Increase (decrease) in trade accounts payable                        (7,782)         21,420        (159,802)         51,085
Increase (decrease) in payables and other current liabilities       (48,111)         35,830         103,351         290,189
                                                               ------------    ------------    ------------    ------------
                                                                    (54,849)         61,711          25,569         333,466
                                                               ------------    ------------    ------------    ------------

                                                               ------------------------------------------------------------
                                                               $    154,623    $    107,784    $    157,848    $  1,210,050
Appendix B -
Non cash transactions
Waiver of loan by principal shareholder
in exchange for rights to royalties                                      --              --    $    649,289    $    649,289
                                                               ============    ============    ============    ============

Waiver of management fees in  previous year                              --    $     33,333              --    $     33,333
                                                               ============    ============    ============    ============

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest                                                       $         84    $      4,903    $     13,485    $    150,309
                                                               ============    ============    ============    ============
</TABLE>

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


                                      F11
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL

      A. General

      Voice Diary Inc. ("the Company") was incorporated in the State of Delaware
      on February 26, 2002. In June and July 2002, the Company acquired
      approximately 99% of the outstanding shares of Voice Diary Ltd., an
      Israeli corporation ("the Subsidiary"), through an exchange of shares of
      the Company with former shareholders of the Subsidiary. Under generally
      accepted accounting principles, the transaction was accounted for as
      reorganization under common control and accordingly, the financial
      statements represent the consolidated financial position, operating
      results and cash flows of the Company and the Subsidiary for all periods
      from inception of the subsidiary. The Subsidiary began its operations in
      October 1, 1993 and has been in the development stage since then.

      B. Going concern

      The accompanying financial statements have been prepared assuming that the
      Company will continue as a going concern, which contemplates the
      realization of assets and the satisfaction of liabilities in the normal
      course of business. The Company's accumulated deficit as of December 31,
      2004 of $3,220,593, working capital deficit as of December 31, 2004 of
      $573,640 and accumulated negative cash flow used in operating activity of
      $2,010,543 raise substantial doubt about its ability to continue as a
      going concern. See also note 6.

      The ability of the Company to continue as a going concern is dependent
      upon the Company's ability to raise new funding, to devise and execute a
      strategy and, ultimately, to attain profitable operation adequate to
      support the Company's expense structure. All these goals depend on future
      events.

      Since the second half of 2002 the Company's operations were carried out
      with a significantly reduced staff and presently the President of the
      Company is its only employee.

      Management is looking to add additional lines of products that will
      contribute to growth, through strategic acquisitions or mergers, and
      following such steps to raise the necessary funds to contemplate its
      development program for new products and working capital. Although there
      have been some preliminary discussions in this direction, there are no
      concrete discussions ongoing at this time, and we can make no assurances
      that we will be able to complete any such transactions on terms favorable
      to the Company or its shareholders.


                                      F12
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL (Cont.)

      C. Other risk factors

      1. The Company had almost no sales in 2004. It has discontinued the
      manufacturing of its Voice PDAs and it has no source of revenues at the
      present.

      2. The Company does not have the funds necessary to continue its
      operations at the current expense level.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

      A. General

      The financial statements have been prepared in conformity with accounting
      principles generally accepted in the United States of America.

      B. Principles of consolidation

      The Company's consolidated financial statements include the financial
      statements of the Company and its wholly owned Subsidiary in Israel, after
      elimination of material inter-company transactions and balances.

      C. Functional currency and foreign currency translation

      The currency of the primary economic environment in which the operations
      of the Company and its Subsidiary are conducted is the U.S. dollar
      ("dollar"). Therefore, the Company uses the dollar as its functional and
      reporting currency. Certain of the dollar amounts in the financial
      statements may represent the dollar equivalent of other currencies, and
      may not necessarily be exchangeable for dollars.

      Transactions and balances denominated in dollars are presented at their
      dollar amounts. Non-dollar transactions and balances are re-measured into
      dollars in accordance with the principles set forth in Statement of
      Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency
      Translation," of the Financial Accounting Standards Board ("FASB").
      Transaction gains and losses are reflected in net financing expenses.

      D. Development stage company

      Since its inception, the Company's efforts have been devoted to research
      and development. The financial statements are therefore presented in
      accordance with the principles of SFAS No. 7 of the FASB - "Accounting and
      Reporting by Development-Stage Enterprises."

      E. Use of estimates

      The preparation of financial statements in accordance with generally
      accepted accounting principles requires that management make estimates


                                      F13
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

      E. Use of estimates (Cont.)

      and assumptions that affect the reported amounts of assets and liabilities
      as well as disclosure of contingent assets and liabilities at the balance
      sheet date and the reported amounts of income and expenses during the
      reporting period. Actual results may vary from these estimates.

      F. Cash and cash equivalents

      Cash and cash equivalents include bank demand deposits and short-term
      unrestricted deposits having original maturity dates not exceeding three
      months from the date of deposit.

      G. Fixed assets

      1. Fixed assets are presented at cost less depreciation.

      2. Annual depreciation is computed based on the straight-line method over
      the estimated useful lives of the assets, as follows:

                                                                  Years
                                                                  -----
      Fixtures                                                     10
      Office furniture                                             10
      Computer equipment and software                              3

      Management reviews fixed assets for impairment when circumstances or
      events indicate that the carrying amount of the asset may not be
      recoverable. If the sum of undiscounted cash flows is less than the
      carrying amount, an impairment loss is recognized at an amount by which
      the carrying amount of the asset exceeds its fair value based on
      discounted cash flows. As of December 31, 2004 the Company had no fixed
      assets.

      H. Revenue recognition

      The Company recognizes revenue upon the shipment of its products to the
      customer provided that persuasive evidence of an arrangement exists, title
      has transferred, the price is fixed, collection of resulting receivables
      is probable and there are no remaining significant obligations.

      I. Research and development costs

      Research and development costs are charged to operations as incurred.

      J. Deferred income taxes

      The Company accounts for income taxes utilizing the asset and liability
      method in accordance with SFAS No. 109, "Accounting for Income Taxes".
      Current tax liabilities are recognized for the estimated taxes payable on
      tax returns for the current year. Deferred tax liabilities or assets are
      recognized for the estimated future tax effects attributable to temporary
      differences between the income tax bases of assets and liabilities and
      their


                                      F14
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

      J. Deferred income taxes (Cont.)

      reported amounts in the financial statements, and for tax loss
      carry-forwards. Measurement of current and deferred tax liabilities and
      assets is based on provisions of enacted tax laws, and deferred tax assets
      are reduced, if necessary, by the amount of tax benefits, the realization
      of which is not considered likely based on available evidence.

      K. Fair value of financial instruments

      The financial instruments of the Company consist mainly of cash and cash
      equivalents, current accounts receivable, accounts payable and accruals.
      Due to the relatively short period to maturity, the fair value of the
      financial instruments included in the working capital of the Company
      approximates their carrying amounts.

      L. Net loss per share

      Loss per share has been computed in accordance with SFAS No. 128,
      "Earnings per Share". Potential securities have been excluded from the
      diluted loss per share computation for the years ended December 31, 2004,
      2003, and 2002 due to the anti-dilution effect.

      M. Stock- based compensation

      Employee stock-based compensation is accounted for in accordance with
      Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
      to Employees" ("APB 25") and the FASB interpretations thereof. Pursuant to
      those accounting pronouncements, compensation is recorded for share
      options granted to employees at the date of grant based on the difference
      between the exercise price of the options and the market value of the
      underlying shares at that date. Due to the terms of the grants, the fair
      value of the compensation in accordance with SFAS No. 123, "Accounting for
      Stock-Based Compensation" approximates the values computed in accordance
      with APB No. 25. Stock-based compensation to non-employees is accounted
      for in accordance with SFAS No. 123.

      N. Effects of recently issued accounting standards

      In December 2004, the FASB issued SFAS No. 123 (revised 2004) "Share Based
      Payments" ("SFAS 123(R)"). This Statement is a revision of FASB Statement
      No. 123, "Accounting for Stock-Based Compensation", which supersedes APB
      Opinion No. 25, "Accounting for Stock Issued to Employees" and its
      authoritative interpretations. SFAS 123(R) establishes standards for the
      accounting for transactions in which an entity exchanges its equity
      instruments for goods or services; focuses primarily on accounting for
      transactions in which an entity obtains employee and directors services in
      share-based payment transactions; and does not change the accounting
      guidance for share-based payment transactions with parties other than
      employees.


                                      F15
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

      N. Effects of recently issued accounting standards (Cont.)

      SFAS 123(R) eliminates the alternative to use APB 25's intrinsic value
      method of accounting that was provided in SFAS 123 as originally issued
      and requires 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 fair-value-based method in this Statement is similar to the
      fair-value-based method in SFAS 123 in most respects. The costs associated
      with the awards will be recognized over the period during which an
      employee is required to provide service in exchange for the award - the
      requisite service period (usually the vesting period). The grant-date fair
      value of employee share options and similar instruments will be estimated
      using option-pricing models adjusted for the unique characteristics of
      those instruments (unless observable market prices for the same or similar
      instruments are available). If an equity award is modified after the grant
      date, incremental compensation cost will be recognized in an amount equal
      to the excess of the fair value of the modified award over the fair value
      of the original award immediately before the modification.

      The provisions of SFAS 123(R) apply to all awards to be granted by the
      Company after June 30, 2005 and to awards modified, repurchased, or
      cancelled after that date. When initially applying the provisions of SFAS
      123(R), in the third quarter of 2005, the Company will be required to
      elect between using either the "modified prospective method" or the
      "modified retrospective method". Under the modified prospective method,
      the Company is required to recognize compensation cost for all awards
      granted after the adoption of SFAS 123(R) and for the unvested portion of
      previously granted awards that are outstanding on that date.

      Under the modified retrospective method, the Company is required to
      restate its previously issued financial statements to recognize the
      amounts previously calculated and reported on a pro forma basis, as if the
      original provisions of SFAS 123 had been adopted. Under both methods, it
      is permitted to use either a straight line or an accelerated method to
      amortize the cost as an expense for awards with graded vesting.

      Management has recently commenced identifying the potential future impact
      of applying the provisions of SFAS 123(R), including each of its proposed
      transition methods, yet is currently unable to fully quantify the effect
      of this Standard on the Company's future financial position and results of
      operations. Nonetheless, it is expected that the adoption of SFAS 123(R)
      will not substantially change the stock-based-award expenses the Company
      is to record in the future in comparison to the expenses recorded under
      the guidance currently applied by the Company.


                                      F16
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

      N. Effects of recently issued accounting standards (Cont.)

      In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
      Assets an amendment of APB No. 29". This Statement amends Opinion 29 to
      eliminate the exception for nonmonetary exchanges of similar productive
      assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. The Statement
      specifies that a nonmonetary exchange has commercial substance if the
      future cash flows of the entity are expected to change significantly as a
      result of the exchange. This Statement is effective for nonmonetary asset
      exchanges occurring in fiscal periods beginning after June 15, 2005.
      Earlier application is permitted for nonmonetary asset exchanges occurring
      in fiscal periods beginning after the date this Statement is issued.
      Retroactive application is not permitted.

NOTE 3 - OTHER RECEIVABLES AND PREPAID EXPENSES

                                 Year ended December 31
                                -----------------------
                                  2 0 0 4      2 0 0 3
                                ----------   ----------

      Prepaid expenses          $       96   $       33
      Government institutions        7,692        2,993
      Others                            --        1,500
                                ----------   ----------
                                $    7,788   $    4,526
                                ==========   ==========

NOTE 4 - FIXED ASSETS, NET

A. Comprised as follows:

                                                    Year ended December 31
                                                   -----------------------
                                                     2 0 0 4     2 0 0 3
                                                   ----------   ----------

      Cost:
      Computers and software                       $       --   $  108,595
      Fixtures                                             --       31,099
      Office furniture                                     --        2,858
                                                   ----------   ----------
                                                           --      142,552
                                                   ----------   ----------
      Accumulated depreciation and amortization:
      Computers and software                               --     (103,462)
      Fixtures                                             --       (8,986)
      Office furniture                                     --       (1,191)
                                                   ----------   ----------
                                                           --     (113,639)
                                                   ----------   ----------

      Net                                          $       --   $   28,913
                                                   ==========   ==========

B. According to management decision the subsidiary has scrapped all its fixed
assets.


                                      F17
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - OTHER PAYABLES

      A. Comprised as follows:

                                                  Year ended December 31
                                                  -----------------------
                                                    2 0 0 4      2 0 0 3
                                                  ----------   ----------
      Other Payables
      Employees and payroll accruals              $   27,955   $   63,102
      Fund for the Encouragement of Marketing*        21,219       20,188
      Liabilities for severance pay (Note 5B)         11,882           --
                                                  ----------   ----------
                                                  $   61,056   $   83,290
                                                  ==========   ==========

      *     Claim for refund of amounts received by the Subsidiary from the fund
            by the Ministry of Industry and Trade of Israel.

      B. Liabilities for severance pay

      The Subsidiary is subject to certain Israeli law and labor agreements that
      determine the obligations of the Subsidiary to make severance payments to
      dismissed employees and to employees leaving employment under certain
      other circumstances. The obligation for severance pay benefits, as
      determined by Israeli law, is based upon length of service and the
      employee's most recent salary. The obligation is presented as a short term
      liability since the employees have been laid off. (In 2003 it was
      presented under Long Term Liability.)

NOTE 6 - SHORT TERM BANK LOANS AND LEGAL PROCEEDINGS

      A. In August 2001 the Subsidiary received a loan in the amount of
      approximately $102,000 from the Industrial Development Bank of Israel
      Ltd., ("IDBI"). The loan bears an interest at the rate of LIBOR+4% per
      annum paid monthly.

      B. The Subsidiary is in default in its repayments of the loan. IDBI is
      engaged in court ordered collection proceedings against the Subsidiary for
      non-payment of the debt. The sum claimed is approximately $250,000,
      including penalties and interest. The entire amount has been accrued in
      The Short Term Debt. In relation to the pro-forma effect on the Company's
      financial statements if the Subsidiary's assets and liabilities are
      liquidated as a result of receivership see Note 7. IDBI is also engaged in
      court ordered collection proceedings against the Company's President, who
      has personally guaranteed approximately $50,000 of the debt of the
      Subsidiary.

      C. See Note 8C regarding security.


                                      F18
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - TEMPORARY SUSPENSION OF SUBSIDIARY'S OPERATIONS

      In August 2004 the Company decided to temporarily suspend operations of
      the Subsidiary until it reaches settlement with IDBI. Following is the
      pro-forma effect on the Company's Financial Statements if the subsidiary's
      assets and liabilities are liquidated as a result of receivership:

<TABLE>
<CAPTION>
                                                                                           December 31
                                                                                          ------------
                                                                                             2 0 0 4
                                                                                          ------------
<S>                                                                                       <C>
      CURRENT ASSETS
      Cash and cash equivalents                                                           $     18,261
      Other receivables and prepaid expenses                                                        96
                                                                                          ------------

                                                                                          ------------
                                                                                                18,357
                                                                                          ============

      CURRENT LIABILITIES
      Trade accounts payable                                                                    11,173
      Accrued expenses                                                                          50,012
      Other payables                                                                               893
                                                                                          ------------
                                                                                                62,078
                                                                                          ------------

      SHAREHOLDERS' DEFICIENCY
      Share capital:
        Shares of Class A Common Stock $0.01 par value
          Authorized - 20,000,000  shares,  Issued and Outstanding - 10,022,977
          shares as of December 31, 2004 and 9,047,036 shares as of December 31, 2003          100,229
        Shares of Class B Common Stock $ 0.01 par value
          Authorized - 8,344 shares
          Issued and Outstanding - 744 shares                                                        7
      Additional paid-in capital                                                             3,082,293
      Subscription receivable                                                                   (5,657)
      Deficit accumulated during the development stage                                      (3,220,593)
                                                                                          ------------
                                                                                               (43,721)
                                                                                          ------------

                                                                                          ------------
                                                                                                18,357
                                                                                          ============
</TABLE>

NOTE 8 - COMMITMENTS

      A. Royalties

      1. In accordance with agreements for financing research and development
      with the Office of the Chief Scientist of the Government of Israel
      ("O.C.S."), the Subsidiary undertook to pay royalties at a rate of 3.5 %
      of the revenues from the sale of products developed under the research and
      development programs, up to the amount of the financing received. An
      accrual for the aforementioned royalties has been recorded in the
      financial statements.


                                      F19
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS (cont.)

      A. Royalties (cont.)

      2. In June 30, 2002 the Subsidiary signed an agreement with Aryt
      Industries Ltd (Subsidiary's former parent company) ("Aryt"). The
      Subsidiary undertook to pay to Aryt royalties from the sales of the
      Subsidiary's products up to an aggregate amount of $751,000, in exchange
      for the cancellation by Aryt of all of its rights, title and interest in
      and to any obligation of the Subsidiary or any other entity on its behalf.
      The rate of the royalties shall be as follows:

      -     10% of the sales of the Subsidiary's products, until the earlier to
            occur of: (i) the lapse of 3 years following the date hereof, or
            (ii) such time as the aggregate sum paid by the Subsidiary pursuant
            to the terms amounts to $250,000 (the term during which this 10%
            royalty rate is applicable shall be hereinafter referred to as the
            "First Term").

      -     6% of the sales of the Subsidiary's products, commencing at the end
            of the First Term and ending on the earlier to occur of: (i) the
            lapse of 2 years following the end of the First Term, or (ii) such
            time as the aggregate sum paid by Subsidiary amounts to $500,000
            cumulatively (the term during which this 6% royalty rate is
            applicable shall be hereinafter referred to as the "Second Term").

      -     1% of the sales of the Subsidiary's products, commencing at the end
            of the Second Term and ending on the earlier to occur of: (i) the
            lapse of 2 years following the end of the Second Term, or (ii) such
            time as the aggregate sum paid by the Subsidiary amounts to $751,000
            cumulatively.

      The Subsidiary recorded a provision for the royalties in the financial
      statements.

      B.    According to a decision on August 24, 1999 of the O.C.S., the
            Subsidiary was requested to repay an amount of $43,677 (including
            interest) to the O.C.S. for amounts received by the Subsidiary in
            1998. The Subsidiary recorded a provision in its books for the full
            amount of this request. The Subsidiary counter claims additional
            participation by the O.C.S. in research and development expenses for
            the period from December 1998 to March 1999. The Subsidiary has not
            recorded a receivable in connection with this claim.

      C.    Liens

      A floating lien has been placed on all the Subsidiary's assets,
      securities, notes and other documents in favor of IDBI.


                                      F20
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS' DEFICIENCY

      A. General

      The total number of shares of the Company is as follows:

                                       Authorized        Issued and Outstanding
                                       ----------        ----------------------

        Class A
      Common Stock                     20,000,000              10,022,977
                                       ==========              ==========
        Class B
      Common Stock                          8,344                     744
                                       ==========              ==========

      Each share has a par value of $0.01. Each share of Class B Common Stock is
      convertible at any time at the option of its holder or holders and for no
      additional consideration into such number of fully paid and non-assessable
      shares of Class A Common Stock as shall equal the quotient obtained by
      dividing the number of shares of Class A Common Stock outstanding at the
      close of business on the day immediately preceding the date the conversion
      notice is received by the Company, by 7,600. The shares of Class A and
      Class B Common Stock confer to holders the right to receive notice to
      participate and vote in general meetings of the Company and the right to
      receive dividends, if declared. The shares of Class B Common Stock have
      the right to appoint one director.

      The holders of Class A and Class B Common Stock shall vote and participate
      ratably in dividends as a single class. Each share of Class A Common Stock
      entitles its holder to one vote and each share of Class B Common Stock
      entitles its holder to such number of votes as shall equal the number of
      whole shares of Class A Common Stock into which such share of Class B
      Common Stock is convertible. Each share of Class A Common Stock
      participates in dividends as one share of a single class and each share of
      Class B Common Stock participates in dividends as the whole number shares
      of Class A Common Stock into which such share of Class B Common Stock is
      convertible.

      In December 2003 1,656 shares of Class B were converted to 1,618,885
      shares of Class A.


                                      F21
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS' DEFICIENCY (CONT.)

      A. General (Cont.)

      A summary of the status of the Company's and the Subsidiary's stock
      options as of December 31, 2004, 2003 and 2002, and of changes during the
      periods then ended, is presented below:

      1.    Company (See B15-23)

<TABLE>
<CAPTION>
                                                                     December 31,
                                               ---------------------------------------------------------
                                                                                             Exercise
                                                 2 0 0 4         2 0 0 3        2 0 0 2        price
                                               ------------   ------------   ------------   ------------
      <S>                                      <C>            <C>            <C>            <C>
      Outstanding at beginning of year               20,000             --             --   $         --
      Granted during year                           955,941         20,000             --     $0.01-0.25
      Exercised during year                         975,941             --             --     $0.01-0.25
                                               ------------   ------------   ------------   ------------
      Outstanding at end of year                         --         20,000             --   $         --
                                               ============   ============   ============   ============
      Weighted average fair value of options
      granted during the year                  $       0.25   $       0.05
                                               ============   ============
</TABLE>

      2.    Subsidiary

<TABLE>
<CAPTION>
                                                                     December 31,
                                               -----------------------------------------------------------
                                                                                                Exercise
                                                 2 0 0 4         2 0 0 3        2 0 0 2           price
                                               ------------   ------------    ------------    ------------
      <S>                                      <C>            <C>             <C>             <C>
      Outstanding at beginning of year                   --         60,162          42,414    $          0
      Granted during year                                --             --          20,614    $          0
      Exercised during year                              --        (59,295)             --    $          0
      Forfeited during year                              --           (867)         (2,866)   $          0
                                               ------------   ------------    ------------    ------------
      Outstanding at end of year                         --             --          60,162    $          0
                                               ============   ============    ============    ============
      Weighted average fair value of options
      granted during the year                  $         --    $         --    $       1.21
                                               ============    ============    ============
</TABLE>

      B. Issuance of share capital and options

      1. In June and July 2002, the Company acquired approximately 99% of the
      outstanding shares of the Subsidiary. Under generally accepted accounting
      principles, the transaction was accounted for as reorganization under
      common control. The shares of Common Stock were exchanged for shares of
      Class A Common Stock and shares of Preferred Stock were exchanged for
      shares of Class B Common Stock.


                                      F22
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS' DEFICIENCY (CONT.)

      B. Issuance of share capital and options (Cont.)

      2. During the period from its inception through 1998, the Subsidiary
      issued 120,640 shares of Common Stock to 29 investors at a price per share
      ranging from $3 to $38.

      3. On October 17, 1999, the Subsidiary issued 7,630 shares of Common Stock
      to three investors in consideration of $21,936.

      4. In 1999, the Subsidiary issued 53,990 options to the CEO and 9,937
      options to two other employees. The options were convertible to shares of
      Common Stock with no exercise price and in consideration for waiving their
      salaries for 1999. The value of the options, totaling $ 199,864, was
      estimated by the Subsidiary at a price of $3 per option based on the last
      share placement price. That amount was charged to operations.

      5. In 2000, the Subsidiary issued 180,000 options to the CEO and 31,633
      options to two additional employees. The options are convertible to shares
      of Common Stock for no exercise price and in consideration for waiving
      their salaries for 2000. The value of the options, totaling $50,391, was
      estimated by the Subsidiary at a price of $0.25 per options based on the
      last share placement price. That amount was charged to operations.

      6. On November 1, 2000, the Subsidiary issued 213,718 shares of Common
      Stock to two investors in consideration for $53,629.

      7. On December 1, 2000, the Subsidiary issued 300,000 shares of Common
      Stock to a related party pursuant to a financing agreement in
      consideration for a credit line of $150,000. The value of the shares of
      Common Stock, totaling $74,039, was estimated by the Subsidiary using an
      average price of $0.25 per share and was charged to operations.

      8. On December 1, 2000, the Subsidiary issued 2,400 shares of Preferred
      Stock to the CEO in consideration of 233,990 options.

      9. During 2000, the Subsidiary issued 24,825 options to suppliers in
      consideration or services rendered to the Subsidiary. The options are
      convertible to shares of Common Stock with no exercise price. The value of
      the options, totaling $30,145, was estimated by the Subsidiary based on
      the fair value of the services rendered. That amount was charged to
      operations.

      10. In February 2002, Aryt Industries Ltd (the Subsidiary's former parent
      company) ("Aryt") granted a credit line of $425,000 to the Subsidiary to
      be available throughout 2002. In consideration, the Subsidiary issued
      98,249 shares to Aryt. Deferred compensation cost in the amount of
      $196,498 was calculated based on the price and number of shares issued to
      Aryt in consideration for the credit line. On June 30, 2002 the credit
      line was terminated and, accordingly, 50% of the abovementioned amount
      ($98,249) was charged to operations.


                                      F23
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS' DEFICIENCY (CONT.)

      B. Issuance of share capital and options (Cont.)

      11. On February 13, 2002, the Subsidiary issued 65,177 shares Common Stock
      to a related party for consideration of $65,177.

      12. On June 30, 2002, Aryt decided to waive all of its rights pertaining
      to its shares of the Subsidiary and to sell its shareholdings to the
      Company for total consideration of $1. In addition, Aryt waived debt in
      the amount of $649,289 previously included in short-term loans from
      Related Party. The amount has been included in additional paid in capital.

      13. In December 2002 the Company acquired 13,946 shares of the Subsidiary
      representing 0.37% from the share capital of the Subsidiary for total
      consideration of $0.2.

      14. In December 2002, the Subsidiary issued 20,614 options to a
      distributor in consideration for services rendered to the Subsidiary. The
      options are convertible to shares of Common Stock with no exercise price.
      The value of the options, totaling $25,000, was estimated by the
      Subsidiary based on the fair value of the services rendered. That amount
      was charged to operations.

      15. In January 2003, five option holders of the Subsidiary exercised
      59,295 options for 59,295 shares of the Subsidiary. The options had no
      exercise price. On January 6, 2003 the Company issued 72,000 shares of
      Class A Common Stock in consideration for those 59,295 shares of
      Subsidiary's Common Stock.

      16. In May 2003 the Company adopted a Stock Options Plan for employees and
      subcontractors. Under this plan, in September 2003, the Company granted
      Mr. Uri Z. Tolkowsky, then Vice President of the Company, 20,000 options
      exercisable until September 2006, at a price of $0.01 per share.

      17. In May 2003 The Company filed a registration statement with the
      Securities Exchange Commission (the "SEC") to register 2,400,000 shares of
      Class A Common Stock to be offered to the public; 2,726,470 shares of
      Class A Common Stock to be offered by selling shareholders, 1,000,000
      shares of Class A Common Stock pursuant to a stock option plan for
      employees and suppliers, (see 17 above) and 1,618,885 shares of Class A
      Common Stock to be issued upon the conversion of Class B Common Stock. The
      SEC granted effectiveness to the registration statement in June 2003. The
      offering was closed on December 15, 2003. The Company sold to the public
      2,297,257 shares of Class A Common Stock at a price of $0.07 in
      consideration of $160,808. 1,656 shares of the Class B Common Stock were
      converted into 1,618,885 shares of Class A Common Stock. In June 2004 the
      Company's Class A Common Stock started trading on the OTC BB.


                                      F24
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS' DEFICIENCY (CONT.)

      B. Issuance of share capital and options (Cont.)

      18. During the period from June 2003 to September 2003 several investors
      invested in the Company an aggregate amount of $200,000 in consideration
      for 4,039,214 shares of Class A Common Stock. The investment was made
      pursuant to Regulation S under the Securities Act of 1933, as amended. The
      investors were led by the principals of Nir-Or Israel Ltd. ("Nir-Or"), an
      Israeli company. One of the principals of Nir-Or became a director in the
      Company.

      19. On August 2003 the Company issued 384,817 shares of Class A Common
      Stock to Natali (the Company for Emergency Medical Services in Israel)
      Ltd., in consideration of $3,848.17 to be paid until September 2006.

      20. On July 2004, the Company filed a registration statement on form S-8
      to register 1,000,000 shares of Class A Common Stock to be issued upon
      exercise of options granted under the Company's 2003 Stock Option Plan. As
      of December 31, 2004, 975,941 options have been granted (955,941 and
      20,000 in 2004 and 2003, respectively) to certain advisors of the Company
      at an exercise price of $0.01-$0.25 per share. All the options granted
      have been exercised during 2004. The Company accounted for these options
      under the Fair-value method of FAS No. 123 and EITF 96-18. The fair value
      was determined using the Black-Scholes pricing model with the following
      assumptions: risk-free interest rate of 1.41%-1.70%, volatility rate of
      5.72%-10.62%, dividend yields of 0% and an expected life of one day to
      three years. Compensation expenses of $183,629, $1,000 and $25,000 were
      recognized for the years ended December 31, 2004, 2003 and 2002,
      respectively.

      21. On July 2004, the Company granted and issued 595,000 shares of Class A
      Common Stock upon exercise of options granted to advisors under the 2003
      Stock Option Plan. The exercise price was $0.01 and the proceeds received
      were $5,950.

      22. On August 2004, the Company granted 180,941 options under the 2003
      Stock Option Plan in consideration for solicitation services provided in
      relation to the order from Natali. The exercise price is $0.01. The
      options were exercised in August, 2004.

      23. On September 2004, the Company granted a consultant an option to
      purchase 200,000 Class A Common Stock at a price (after amendment) of
      $0.25 per share for services regarding potential sources of capital and
      introduction to companies in the US and in China who have an interest in
      the products and services that the Company has to offer. The consultant
      has exercised the option in October, 2004.


                                      F25
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - REVENUES

      A.    Main customers:

                          Year ended December 31
                   ------------------------------------
                    2 0 0 4      2 0 0 3      2 0 0 2
                   ----------   ----------   ----------

      Customers:
         A         $      990   $       --   $       --
                   ==========   ==========   ==========
         B         $       --   $   42,724   $       --
                   ==========   ==========   ==========
         C         $       --   $   26,473   $       --
                   ==========   ==========   ==========
         D         $       --   $       --   $   16,573
                   ==========   ==========   ==========

      B.    Data by geographical regions:

<TABLE>
<CAPTION>
                                                     Year ended December 31
                                              ------------------------------------
                                                2 0 0 4      2 0 0 3      2 0 0 2
                                              ----------   ----------   ----------
      <S>                                     <C>          <C>          <C>
      Sales distribution, by target market:
          Israel                              $    1,557   $   13,689   $   31,640
          U.S.A                                       --       42,724          651
          Europe                                     990       26,473        1,711
                                              ----------   ----------   ----------
                                              $    2,547   $   82,886   $   34,002
                                              ==========   ==========   ==========
</TABLE>

NOTE 11 - COST OF REVENUES

<TABLE>
<CAPTION>
                                                                            Cumulative from
                                                                            October 1, 1993
                                                                                (date of
                                                                              commencement
                                                                             of operations)
                                              Year ended December 31        to December 31,
                                       ------------------------------------ ---------------
                                         2 0 0 4      2 0 0 3      2 0 0 2      2 0 0 4
                                       ----------   ----------   ----------   ----------
<S>                                    <C>          <C>          <C>          <C>
      Materials                        $    3,979   $   33,847   $   12,751   $  420,128
      Salaries and related expenses            --        7,865       30,924       81,340
      Sub-contractors                          --           --           --       50,783
      Non-cash compensation expenses           --           --           --       20,025
      Other                                    --        8,996       15,734       63,653
                                       ----------   ----------   ----------   ----------
                                       $    3,979   $   50,708   $   59,409   $  635,929
                                       ==========   ==========   ==========   ==========
</TABLE>


                                      F26
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - RESEARCH AND DEVELOPMENT EXPENSES

<TABLE>
<CAPTION>
                                                                                 Cumulative from
                                                                                 October 1, 1993
                                                                                     (date of
                                                                                   commencement
                                                                                  of operations)
                                                   Year ended December 31        To December 31,
                                            ------------------------------------ ---------------
                                              2 0 0 4      2 0 0 3      2 0 0 2      2 0 0 4
                                            ----------   ----------   ----------   ----------
<S>                                         <C>          <C>          <C>          <C>
      Salaries and related expenses         $       --   $    8,214   $  111,051   $  882,533
      Sub-contractors                               --           --        6,221      387,921
      Materials                                     --           --       10,202       87,598
      Non-cash compensation expenses                --           --           --       57,004
      Other                                         --        2,645       15,107      375,603
                                            ----------   ----------   ----------   ----------
                                                    --       10,859      142,581    1,790,659
      Less:
      Participation from Government funds           --           --           --     (704,350)
      Grants received                               --           --           --       39,244
                                            ----------   ----------   ----------   ----------
                                            $       --   $   10,859   $  142,581   $1,125,553
                                            ==========   ==========   ==========   ==========
</TABLE>

NOTE 13 - MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                                                   Cumulative from
                                                                                   October 1, 1993
                                                                                     (date of
                                                                                    commencement
                                                                                   of operations)
                                                   Year ended December 31          to December 31,
                                      -------------------------------------------  ---------------
                                         2 0 0 4         2 0 0 3        2 0 0 2        2 0 0 4
                                      ------------    ------------   ------------   ------------
<S>                                   <C>             <C>            <C>            <C>
Marketing, General & Administrative
Salaries and related expenses         $         --    $         --   $    114,923   $    410,351
Advertising and marketing costs              6,530          13,093         38,842        193,545
Depreciation                                 5,727           8,680          7,723        122,469
Non-cash compensation expenses             183,629           1,000         25,000        416,600
Professional services                       62,854          86,004         65,309        331,500
Office expenses                             20,662          13,968          9,945        173,103
Management fees                             40,000          40,000         33,333        161,615
Car maintenance                             16,874          15,885         11,881         92,545
Others                                      (6,647)          9,858         22,180         95,680
                                      ------------    ------------   ------------   ------------
                                      $    329,629    $    188,488   $    329,136   $  1,997,408
Less: expenses attributed to
research and development expenses               --              --             --       (335,862)
                                      ------------    ------------   ------------   ------------
                                      $    329,629    $    188,488   $    329,136   $  1,661,546
                                      ============    ============   ============   ============
</TABLE>


                                      F27
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - FINANCIAL EXPENSES

<TABLE>
<CAPTION>
                                                                           Cumulative from
                                                                           October 1, 1993
                                                                               (date of
                                                                             commencement
                                                                            of operations)
                                             Year ended December 31         to December 31,
                                        2 0 0 4      2 0 0 3      2 0 0 2      2 0 0 4
                                      ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>
      Financial expenses to banks     $  134,960   $   45,541   $   10,613   $  357,664
      Interest to related party               --           --       33,465       42,986
      Amortization of debt issuance
      costs                                   --           --       98,249      168,561
                                      ----------   ----------   ----------   ----------
                                      $  134,960   $   45,541   $  142,327   $  569,211
                                      ==========   ==========   ==========   ==========
</TABLE>

NOTE 15 - OTHER INCOME, NET

      Consists of profit from sales of PC cards to Nir-Or and loss from sales of
      computer equipment included in the Subsidiary's fixed assets. (In 2003 -
      profit from sales of PC cards to Nir-Or. In 2002 - consulting services to
      Nir-Or.)

NOTE 16 - INCOME TAXES

      A. The Subsidiary is assessed under the provisions of the Israeli Income
      Tax Law (Inflationary Adjustments) 1985, pursuant to which results for tax
      purposes are measured in new Israeli shekels in real terms in accordance
      with changes in the Israeli consumer price index.

      B. Deferred taxes

      Under Statement No. 109 of the FASB, deferred tax assets are to be
      recognized for anticipated tax benefits associated with net operating loss
      carry-forwards and deductible temporary differences. A valuation allowance
      is recorded if it is more likely than not some or all of the deferred tax
      assets will not be realized.

                                        As of December 31
                                    -----------------------
                                     2 0 0 4      2 0 0 3
                                    ----------   ----------

      Loss carry-forwards           $  705,201   $  762,913
      Other temporary differences        4,159        4,208
                                    ----------   ----------
                                       709,360      767,121
      Less: valuation allowance        709,360      767,121
                                    ----------   ----------
                                    $       --   $       --
                                    ==========   ==========


                                      F28
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - INCOME TAXES (Cont.)

      B. Deferred taxes (Continued)

      The Company has provided for a valuation allowance in respect of all
      deferred tax benefits resulting from tax loss carry-forwards and other
      temporary differences, due to the uncertainty regarding the realization of
      such benefits.

      As of December 31, 2004, the Company and the Subsidiary had carry-forward
      tax losses generated in the U.S. and in Israel of approximately $532,744
      and $1,537,051 respectively. The Subsidiary's carry-forward tax losses are
      denominated in New Israel Shekels and are linked to the Israeli consumer
      price index.

      C. Tax assessments

      The Company has not received final tax assessment for income tax purposes
      since incorporation.

      The Subsidiary has received final tax assessment up to and including the
      2000 tax year.

NOTE 17 - RELATED PARTY TRANSACTIONS

                                       Year ended December 31
                                ------------------------------------
                                  2 0 0 4      2 0 0 3      2 0 0 2
                                ----------   ----------   ----------
Related parties
Expenses -
Purchase of materials           $       --   $       --   $    6,158
                                ==========   ==========   ==========
Sub-contractors                 $       --   $       --   $    9,027
                                ==========   ==========   ==========
Travel expenses                 $    2,987   $       --   $    3,837
                                ==========   ==========   ==========
Salaries and related expenses   $       --   $       --   $   59,823
                                ==========   ==========   ==========
Management fees                 $   40,000   $   40,000   $   33,000
                                ==========   ==========   ==========
Other income, net               $    2,329   $       --   $       --
                                ==========   ==========   ==========


                                      F29
<PAGE>

                                    PART III

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

      The following table sets forth certain information concerning the
Company's directors as of April 1, 2004.

Name               Age        Position with Company
----               ---        ---------------------

Arie Hinkis        57         President, Chief Executive Officer,
                              Chief Financial Officer and Director
Nathan Tarter      57         Director

      Mr. Hinkis has been chief executive officer of VDL since January 1997 and
has been president and director of our Company since its inception. From July
1991 until January 2002, Mr. Hinkis was director of Robogroup T.E.K. Ltd, a
NASDAQ company which made an investment in our Company prior to 2001. From
October 2002 until July 2003, Mr. Hinkis was CFO of Nir-Or.

      Mr. Tarter has been a director of the Company since May 2003. Nathan
Tarter has been president and director of Nir-Or since 1982. Under this capacity
Mr. Tarter engineered and managed the development of over 250 computer-embedded
systems for avionics and military applications.

      Mr. Ofer Yonach, who is the largest shareholder of our Company, is also a
director and shareholder of Nir-Or.

      Directors serve in that capacity for a term of one year or until their
successors are duly elected and qualified. The executive officers are appointed
by and serve at the will of the board of directors to serve until the earlier of
their resignation or removal with or without cause by the board of directors.

      There are no family relationships between any two or more directors or
executive officers. There are no arrangements or understandings between any two
or more directors or executive officers.

      We have no audit committee financial expert because we believe we are too
small to need one and since we are being reviewed by independent auditors on a
regular basis.


Compliance with Section 16(a) of the Exchange Act


      Under Section 16 of the Exchange Act, our directors and executive officers
and beneficial owners of more than 10% of any class of our equity securities are
required to file certain reports, within specified time periods, indicating
their holdings of and transactions in any class of equity securities and
derivative securities. Based solely on a review of any such reports provided to
us and written representations from such persons regarding the necessity to file
any such reports, we are not aware of any failures to file reports or report
transactions in a timely manner during our fiscal year ended December 31, 2004.


                                       13
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

      The following summary compensation table shows the compensation paid
during the last three fiscal years to the Company's chief executive officer. No
executive officer received salary and bonus during the fiscal year ended
December 31, 2004 in an aggregate amount which exceeded $100,000.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                    Annual Compensation         Long Term Compensation
                                                    -------------------         ----------------------
                                            Management        Other Annual      Awards
Name and Principal Position         Year     Salary           Compensation      Restricted Stock
---------------------------         ----     ------           ------------      ----------------
<S>                                 <C>     <C>               <C>               <C>
Arie Hinkis, President              2004    $40,000                 0                 0
                                    2003    $15,000                 0                 0
                                    2002    $98,221                 0                 0
</TABLE>

Employment and Management Agreements

      Arie Hinkis is employed by our Company pursuant to an employment agreement
dated July 3, 2002. The agreement provides that Mr. Hinkis is paid a salary,
starting on March 1, 2002, at the amount of $40,000 per year plus a bonus to be
determined in the sole discretion of the board of directors. The amount accrued
for his salary is included in our financial reports under "Accrued Expenses".
During his stay in the USA we reimburse Mr. Hinkis on his hotel or rent expenses
and pay for his rented car. Mr. Hinkis was employed by VDL until December 2002.
Arie Hinkis waived a total amount of $58,333 for 2002 and 2003, this waiver is
reflected under additional paid-in capital in the financial statements

Directors' Compensation

      Directors are not paid for their services as directors. We do not
currently have any formal policy as to the compensation we would offer
independent directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth as of April 1, 2004 certain information
with respect to the amount and nature of beneficial ownership of the Company's
Class A Common Stock and Class B Common Stock held by: (i) each person known to
us to be a beneficial owner of more than 5% of the Company's outstanding Class A
Stock and (ii) the directors and officers of the Company. The percentage of
shares beneficially owned is based on there having been 10,022,977 shares of
Class A Common Stock and 744 shares of Class B Common Stock outstanding as of
April 1, 2005.

<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner (1)        Class Of Shares       Number of Shares  Percent (2)
--------------------        ---------------       ----------------  -----------
<S>                         <C>                   <C>               <C>
Arie Hinkis, President and
 director                   Class A Common Stock      981,196(3)     8.91%
Arie Hinkis, President and
 director                   Class B Common Stock          744         100%
Nathan Tarter, director     Class A Common Stock    1,346,405(4)    13.43%
Directors and Executive
 Officers as a group (2
 persons)                   Class A Common Stock    2,327,601       21.15%
Ofer Yonach                 Class A Common Stock    2,022,389       20.18%
GFC Venture Partners LP     Class A Common Stock    2,042,048       20.37%
</TABLE>


                                       14
<PAGE>

-----------------
(1)   Unless stated otherwise, the business address for each person named is c/o
      Voice Diary Inc.

(2)   Calculated pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of
      1934. Under Rule 13d-3(d), shares not outstanding which are subject to
      options, warrants, rights or conversion privileges exercisable within 60
      days are deemed outstanding for the purpose of calculating the number and
      percentage owned by a person, but not deemed outstanding for the purpose
      of calculating the percentage owned by each other person listed. We
      believe that each individual or entity named has sole investment and
      voting power with respect to the shares of Common Stock indicated as
      beneficially owned by them (subject to community property laws where
      applicable) and except where otherwise noted.

(3)   Mr. Hinkis transferred his Class A Common Stock to his adult children In
      addition, shares held by two limited partnerships of which Mr. Hinkis was
      the general partner have been distributed to the limited partners. The
      amount disclosed in this table represents the shares of Class A Common
      Stock issuable to Mr. Hinkis upon conversion of the shares of Class B
      Common Stock held by Mr. Hinkis.

(4)   Includes 450,722 shares held by Mr. Tarter's children.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Under the agreement with Natali regarding the order of the CardioGSM,
Natali purchased 384,817 shares of Class A Common Stock of the Company for a
total of $ 3,848.17 to be paid on August 19, 2006. These shares are pledged to
the Company to secure Natali's commitments under the CardioGSM order agreement.


                                       15
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

31.1  Certification by President and Chief Financial Officer Arie Hinkis
      pursuant to U.S.C. Securities 1350, as adopted pursuant to section 302 of
      the Sarbens-Oxley Act of 2002.


31.2  Certification by President and Chief Financial Officer Arie Hinkis
      pursuant to U.S.C. Securities 1350, as adopted pursuant to section 906 of
      the Sarbens-Oxley Act of 2002.

(b)   Reports on Form 8-K

      Listed below are reports on Form 8-K filed during the fiscal quarter ended
December 31, 2005.

      None.

ITEM 14. CONTROLS AND PROCEDURES

      As required by United States Securities and Exchange Commission ("SEC")
rules, we have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this
Annual Report. This evaluation was carried out under the supervision and with
the participation of our principal executive and principal financial officer.
Based on this evaluation, this officer has concluded that the design and
operation of our disclosure controls and procedures are effective. There were no
significant changes to our internal controls or in other factors that could
significantly affect internal controls subsequent to the date of their
evaluation.

      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 of 1934, as amended,
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 principal executive officer
and principal financial officer to allow timely decisions regarding required
disclosure. In designing our disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

      The Company is working closely with its corporate and securities lawyers
to ensure that it maintains compliance with the Sarbanes-Oxley Act of 2002, and
the SEC regulations promulgated pursuant to that Act.


                                       16
<PAGE>

                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                         VOICE DIARY INC.
                                         (Registrant)

Dated: April 26, 2005
                                         /s/ Arie Hinkis
                                         ------------------------------
                                         Arie Hinkis
                                         President and Chief Financial Officer

      In accordance with the Exchange Act, this report has been signed below by
the following person on behalf of the registrant and in the capacity and the
date indicated.


Dated: April 26, 2005
                                         /s/ Nathan Tarter
                                         ------------------------------
                                         Nathan Tarter, Director


                                       17