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

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2005

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
             For the transition period from __________ to __________

                        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, 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|

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

The issuer's revenues for its most recent fiscal year were: $0.

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 7, 2006 (a date within the past 60 days) was $1.8 million.

At May 17, 2006, the registrant had outstanding 12,022,977 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>

                                TABLE OF CONTENTS

                                     PART I

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

                                 PART II

ITEM 5     MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER
               MATTERS AND SMALL ISSUER PURCHASES OF EQUITY
               SECURITIES STOCKHOLDER MATTERS ...............................  4
ITEM 6     MANAGEMENT'S DISCUSSION AND ANALYSIS OR
               PLAN OF OPERATION ............................................  6
ITEM 7     FINANCIAL STATEMENTS ............................................. 11
ITEM 8     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
               ON ACCOUNTING AND FINANCIAL DISCLOSURE ....................... 11
ITEM 8A    CONTROLS AND PROCEDURES........................................... 11

                                PART III

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

<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 99.8% 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. Thus we have ceased production of our PDAs. We
have no inventory left of products or components.

      Since August 2004 we suspended the operations of VDL until new research
and development plan is devised and the proper financing is secured. Plans
considered since were not materialized

MERGERS OR ACQUISITIONS

      We are considering mergers and acquisitions 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. We have granted the consultants with
stock options that have been exercised.

OPERATIONS

      In 2005 we had no manufacturing or research and development activity. In
the past, these activities were conducted from the premises of VDL in Israel.


                                       3
<PAGE>

      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.

ITEM 3. LEGAL PROCEEDINGS

      None.

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
                                             -----------------------------------
Q4 2005                                            $0.15            $0.08
Q3 2005                                            $0.15            $0.08
Q2 2005                                            $0.17            $0.05
Q1 2005                                            $0.30            $0.045


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.


                                       4
<PAGE>

      In May 10, 2005, the Company filed a registration statement on Form S-8
registering 1,000,000 shares of its Class A common stock issuable under its 2005
Consultant Stock Plan, which was adopted by the board of directors on May 9,
2005. On June 15, 2005, the Company granted 640,000 options exercisable at $0.01
(par value). On June 30, 2005, these options were exercised. On July 15, 2005,
the Company granted 360,000 options exercisable at $0.01 (par value). The
options were exercised on July 30, 2005.

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.


                                       5
<PAGE>

      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
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 find a new business direction under
the new management; 2) our ability to raise sufficient capital in order to
effectuate our business plan; and 3) our ability to retain our key executives.


                                       6
<PAGE>

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
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. We have an
accumulated deficit as of December 31, 2005 of $3,073,401, a working capital
deficit as of December 31, 2005 of $238,614 and accumulated negative cash flow
used in operating activity of $2,103,127. Our recurring losses from operations,
negative working capital, shareholders' deficiency and negative cash flows raise
substantial doubt about the Company's 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.


                                       7
<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.


                                       8
<PAGE>

      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.

      On May 10, 2005, we filed a registration statement on Form S-8 registering
1,000,000 shares of its Class A common stock issuable under its 2005 Consultant
Stock Plan, which was adopted by the board of directors on May 9, 2005. On June
and July 2005 we granted all the options exercisable at $0.01 (par value). The
options were exercised.

      On June and July 2005 we received a short term loan of $100,000 from GFC
Venture Partners LP (the "lender"), a related party. To secure the loan we
issued warrants for a total of 1,000,000 shares of Class A Common Stock at an
exercise price of the amount equal to the principal and interest due under the
short term loan divided by the number of shares of Common Stock issuable upon
exercise of the warrants. We failed to make payments due under the loan
agreement and as a result the warrants were exercised on September 26, 2005, in
consideration for $101,377 which is the amount of the principal and interest due
under the loan agreement on the date of the exercise of the warrants. Exercise
of the Warrants was the lender's exclusive remedy for our failure to make the
payments on the short term loan.

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, 2005 Compared to the Year Ended December 31, 2004

      We had no revenues in 2005. 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 decreased by approximately
$156,000 (50%) in fiscal year 2005 compared to the previous year. The reason was
mainly due to a decrease in non-cash expenses.

      In fiscal year 2005 we had financial expenses of approximately $15,000
compared to approximately $134,000 in fiscal 2004. In 2004 the expense included
allocation of penalties on a debt that was meanwhile settled.

      Our net profit for fiscal year 2005 was approximately $147,000 compared to
a loss of approximately $480,000. The profit was a result of gain obtained from
a settlement of a debt and waiver of debt to two suppliers.

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.


                                       9
<PAGE>

      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.

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
immediately and we intend to do so either through short term borrowings or
private placements. We expect to be able to raise the necessary funds in the
next quarter.

      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 raise substantial doubt about our ability to
continue as a going concern. We had a deficit in working capital of $238,614 as
of December 31, 2005.

Capital Resources

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

      With regard to certain royalty obligations of our Subsidiary see Note 8 to
the financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      In the regular course of business 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.

      Based on historical U.S. currency movement, we do not believe that
reasonably possible near-term changes in the U.S. dollar exchange rate will
result in a material effect on our future earnings, financial position or cash
flows.

      The effect of currency exchange rate fluctuations on our financial results
is included in financial expenses (income) net.


                                       10
<PAGE>

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, 2005, 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.


                                       11
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)
                        CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2005


                                      F-1
<PAGE>

                                VOICE DIARY INC.
                          (A DEVELOPMENT-STAGE COMPANY)


                 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                                                          Page
                                                                          ----

INDEPENDENT AUDITORS' REPORT                                               F3

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets as of December 31, 2005 and 2004               F4

Consolidated Statements of Operations for the years ended December 31,
2005, 2004 and 2003 and the cumulative period from October 1, 1993
(date of commencement of operations) to December 31, 2005                  F5

Statement of Shareholders' Deficiency for the period from October 1,
1993 (date of commencement of operations) to December 31, 2005          F6 - F9

Consolidated Statements of Cash Flows for the years ended December 31,
2005, 2004 and 2003 and the cumulative period from October 1, 1993
(date of commencement of operations) to December 31, 2005              F10 - F11

Notes to the Consolidated Financial Statements                         F12 - F27


                                      F-2
<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, 2005 and 2004, and the related consolidated statements of operations,
shareholders' deficiency and cash flows for each of the three years in the
period ended December 31, 2005 and for the cumulative period from October 1,
1993 (date of commencement of operations) to December 31, 2005. 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, 2005 and 2004, and their consolidated results
of operations and their consolidated cash flows for each of the three years in
the period ended December 31, 2005 and for the cumulative period from October 1,
1993 to December 31, 2005, 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 Note 1B to the
financial statements, the Company's recurring losses from operations, working
capital deficit, shareholders' deficiency and negative cash flows raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 1B. 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
Tel Aviv, Israel
May 17, 2006


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                             December 31
                                                                                     ---------------------------
                                                                                       2 0 0 5         2 0 0 4
                                                                                     -----------     -----------
<S>                                                                                  <C>             <C>
CURRENT ASSETS
Cash and cash equivalents                                                            $     2,766     $    18,755
Trade accounts receivable                                                                     --              20
Other receivables and prepaid expenses (Note 3)                                            5,316           7,788
                                                                                     -----------     -----------
                                                                                           8,082          26,563
                                                                                     -----------     -----------

                                                                                     -----------     -----------
                                                                                     $     8,082     $    26,563
                                                                                     ===========     ===========
CURRENT LIABILITIES
Bank loans (Note 6)                                                                  $        --     $   250,310
Trade accounts payable                                                                    46,165          51,085
Accrued expenses                                                                         150,178         229,133
Bridge loan                                                                                   --           8,619
Other payables (Note 5)                                                                   50,353          61,056
                                                                                     -----------     -----------
                                                                                         246,696         600,203
                                                                                     -----------     -----------

SHAREHOLDERS' DEFICIENCY (Note 9)
Share capital:
Shares of Class A Common Stock $0.01 par value
(Authorized - 20,000,000 shares. Issued and Outstanding - 12,022,977 shares as of
December 31, 2005 and 10,022,977 shares as of December 31, 2004)                         120,229         100,229
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                                                             2,724,551       2,552,374
Subscription receivable                                                                  (10,000)         (5,657)
Deficit accumulated during the development stage                                      (3,073,401)     (3,220,593)
                                                                                     -----------     -----------
                                                                                        (238,614)       (573,640)
                                                                                     -----------     -----------

                                                                                     -----------     -----------
                                                                                     $     8,082     $    26,563
                                                                                     ===========     ===========
</TABLE>


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


                                      F-4
<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 5          2 0 0 4          2 0 0 3            2 0 0 5
                                                ------------     ------------     ------------     ---------------
<S>                                             <C>              <C>              <C>              <C>
Revenues (Note 10)                              $         --     $      2,547     $     82,886     $       726,396

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

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

Operating costs and expenses

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

Marketing, general and
 administrative expenses
 (Note 13)                                           173,384          329,629          188,488           1,834,930

Operating loss                                      (173,384)        (331,061)        (167,169)         (2,870,016)

Financial expenses, Net (Note 14)
                                                      14,961          134,960           45,541             584,172

Income from Settlement of bank loan (Note 6)         223,084               --               --             223,084

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

Other income (loss), net (Note 15)                   112,453          (17,643)           1,645             127,541
                                                ------------     ------------     ------------     ---------------

Profit (loss) for the period                    $    147,192     $   (483,664)    $   (211,065)         (3,073,401)
                                                ============     ============     ============     ===============

Loss per share:
Basic and diluted                               $       0.01     $      (0.05)    $      (0.06)
                                                ============     ============     ============

Number of shares used in
   computing basic and
 diluted profit (loss) per share                  10,742,977        9,409,486        3,764,961
                                                ============     ============     ============
</TABLE>


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


                                      F-5
<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.


                                      F-6
<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.


                                      F-7
<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          98,249                      982         97,267                                       98,249
  pursuant to financing
  agreement

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.


                                      F-8
<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                                               189,379                                     189,379
rendered

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

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)
                                      ==========   =======   ===========   ===========   ===========    ===========    ===========

Changes in 2005:

Exercise of options for services       1,000,000                  10,000        80,800       (10,000)                       80,800
rendered

Subscription receivables                                                                       3,821                         3,821

Waiver of subscription receivables                                                             1,836                         1,836

Warrants exercised against debt        1,000,000                  10,000        91,377                                     101,377

Profit for the year                                                                                         147,192        147,192
                                      ----------   -------   -----------   -----------   -----------    -----------    -----------

Balance December 31, 2005             12,022,977       744   $   120,236   $ 2,724,551   $   (10,000)   $(3,073,401)  $   (238,614)
                                      ==========   =======   ===========   ===========   ===========    ===========    ===========
</TABLE>


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


                                      F-9
<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 5        2 0 0 4        2 0 0 3          2 0 0 5
                                                       -----------    -----------    -----------    ---------------
<S>                                                    <C>            <C>            <C>            <C>
CASH FLOWS - OPERATING ACTIVITIES
Earnings (loss) for the period                         $   147,192    $  (483,664)   $  (211,065)   $    (3,073,401)
Adjustments to reconcile loss to net
cash used in operating activities (Appendix A)            (239,776)       154,623        107,784            970,274
                                                       -----------    -----------    -----------    ---------------
Net cash used in operating activities                      (92,584)      (329,041)      (103,281)        (2,103,127)
                                                       -----------    -----------    -----------    ---------------

CASH FLOWS - INVESTING ACTIVITIES
Purchase of fixed assets                                        --             --             --           (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)          (150,666)
                                                       -----------    -----------    -----------    ---------------

CASH FLOWS - FINANCING ACTIVITIES
Proceeds from long-term loans                                   --             --             --            210,858
Repayment of long-term loans                                    --             --        (17,410)          (114,397)
Short-term bank credit, net                                (27,226)       124,769         11,587            121,228
Short-term loans from Related Party                        100,000             --             --            749,289
Bridge loan, net                                                --            167        (39,523)             8,619
Issuance of shares                                           3,821         55,950        299,448          1,280,962
                                                       -----------    -----------    -----------    ---------------
Net cash provided by financing activities                   76,595        180,886        254,102          2,256,559
                                                       -----------    -----------    -----------    ---------------

Increase (decrease) in cash and cash equivalents           (15,989)        15,415         (9,679)             2,766
Cash and cash equivalents - beginning of period             18,755          3,340         13,019                 --
                                                       -----------    -----------    -----------    ---------------
Cash and cash equivalents - end of period              $     2,766    $    18,755    $     3,340    $         2,766
                                                       ===========    ===========    ===========    ===============
</TABLE>


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


                                      F-10
<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 5        2 0 0 4        2 0 0 3          2 0 0 5
                                                                -----------    -----------    -----------    ---------------
<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    $       132,278
Exchange-rate (gain) loss                                             1,377             --          5,919              6,772
Liabilities for severance pay                                            --             --          5,474                 --
Loss on sale of fixed assets                                             --         20,116             --             18,388
Waiver of management fees                                                --             --         25,000             58,333
Waiver of suppliers debt                                           (103,834)            --             --           (103,834)
Non-cash compensation expenses                                       82,636        183,629          1,000            744,826
Settlement and waiver of short term loan                           (231,703)            --             --           (231,703)
                                                                -----------    -----------    -----------    ---------------
                                                                   (251,524)       209,472         46,073            625,060
                                                                -----------    -----------    -----------    ---------------

Changes in operating assets and liabilities:

Decrease (increase) in trade accounts receivable                         20          1,138          2,151                 --
Decrease (increase) in other receivables and prepaid expenses         2,472         (3,262)         5,478             (5,316)
Decrease (increase) in inventories                                       --          3,168         (3,168)                --
Increase (decrease) in trade accounts payable                        (4,920)        (7,782)        21,420             46,165
Increase (decrease) in payables and other current liabilities        14,176        (48,111)        35,830            304,365
                                                                -----------    -----------    -----------    ---------------
                                                                     11,748        (54,849)        61,711            345,214
                                                                -----------    -----------    -----------    ---------------
                                                                $  (239,776)   $   154,623    $   107,784    $       970,274
Appendix B -
Non cash transactions
Waiver of loan by principal shareholder
in exchange for rights to royalties
                                                                         --             --             --    $       649,289
                                                                ===========    ===========    ===========    ===============

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

Conversion of loan from related party into share
capital                                                         $   101,377             --             --    $       101,377
                                                                ===========    ===========    ===========    ===============

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


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


                                      F-11
<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 99.8% 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,
      2005 of $3,073,401, working capital deficit as of December 31, 2005 of
      $238,614 and accumulated negative cash flow used in operating activity of
      $2,103,127 raise substantial doubt about its ability to continue as a
      going concern. See also Note 7.

      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 management can make no
      assurances that we will be able to complete any such transactions on terms
      favorable to the Company or its shareholders.


                                      F-12
<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 no sales in 2005. 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."


                                      F-13
<PAGE>

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

      E. Use of estimates

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

      H. Research and development costs

      Research and development costs are charged to operations as incurred.

      I. 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 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.

      J. 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.


                                      F-14
<PAGE>

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

      K. 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.

      L. 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.

      M. Effects of recently issued accounting standards

      In December 2004, the Financial Accounting Standards Board (FASB) issued
      SFAS No. 123(R). SFAS No. 123(R) requires employee share-based equity
      awards to be accounted under the fair value method, and eliminates the
      ability to account for these instruments under the intrinsic value method
      prescribed by APB Opinion No. 25 and allowed under the original provisions
      of SFAS 123. SFAS 123(R) requires the use of an option pricing model for
      estimating fair value, which is then amortized to expense over the service
      periods.

      In January 2005, the SEC issued SAB No. 107, which provides supplemental
      implementation guidance for SFAS 123(R). SFAS No. 123(R) will be effective
      for the Company beginning in the first quarter of fiscal 2006.

      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.


                                      F-15
<PAGE>

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

NOTE 3 - OTHER RECEIVABLES AND PREPAID EXPENSES

                                                         Year ended December 31
                                                       -------------------------
                                                       2 0 0 5           2 0 0 4
                                                       -------           -------

Prepaid expenses                                        $   --            $   96
Government institutions                                  5,316             7,692
Others                                                      --                --
                                                        ------            ------
                                                        $5,316            $7,788
                                                        ======            ======

NOTE 4 - FIXED ASSETS, NET

According to management decision in 2004 the subsidiary has scrapped all its
fixed assets.

NOTE 5 - OTHER PAYABLES

      Comprised as follows:

                                                          Year ended December 31
                                                          ----------------------
                                                          2 0 0 5        2 0 0 4
                                                          -------        -------
Other Payables
Employees and payroll accruals                            $29,134        $27,955
Fund for the Encouragement of Marketing *                  21,219         21,219
Liabilities for severance pay (Note 5B)                        --         11,882
                                                          -------        -------
                                                          $50,353        $61,056
                                                          =======        =======

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


                                      F-16
<PAGE>

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

NOTE 6 - SHORT TERM BANK LOANS AND LEGAL PROCEEDINGS

      The Company recorded the amount waived by the Industrial Development Bank
      of Israel ("IDBI") under a settlement in the statement of operation under
      "Gain from settlement of bank loan".

NOTE 7 - TEMPORARY SUSPENSION OF SUBSIDIARY'S OPERATIONS

      Since August 2004 we suspended the operations of VDL until new research
      and development plan is devised and the proper financing is secured. Plans
      considered since were not materialized

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.

      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 lapse
                  of 3 years following the date hereof (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").


                                      F-17
<PAGE>

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

            -     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 $44,396 (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.

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           12,022,977
                                            ==========           ==========

      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.


                                      F-18
<PAGE>

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

      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.

      A summary of the status of the Company's and the Subsidiary's stock
      options as of December 31, 2005, 2004 and 2003, and of changes during the
      periods then ended, is presented below:

1.    Company (See B15-23)

                                                  December 31,
                                   ---------------------------------------------
                                                                       Exercise
                                   2 0 0 5     2 0 0 4    2 0 0 3       price
                                   --------    --------   --------    ----------

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


2.    Subsidiary

                                                  December 31,
                                   ---------------------------------------------
                                                                       Exercise
                                   2 0 0 5     2 0 0 4    2 0 0 3       price
                                   --------    --------   --------    ----------

Outstanding at beginning of year         --          --     60,162    $        0
Granted during year                      --          --         --    $        0
Exercised during year                80,800          --    (59,295)   $        0
Forfeited during year                80,800          --       (867)   $        0
                                   --------    --------   --------    ----------

Outstanding at end of year               --          --         --    $        0
                                   ========    ========   ========    ==========
Weighted average fair value of
options granted during the year      $ 0.01    $     --   $     --
                                   ========    ========   ========


                                      F-19
<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

      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.

      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.


                                      F-20
<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.)

      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.

      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.


                                      F-21
<PAGE>

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

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

      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.

      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.


                                      F-22
<PAGE>

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

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

      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.

      24. On May 10, 2005, we filed a registration statement on Form S-8
      registering 1,000,000 shares of its Class A common stock issuable under
      its 2005 Consultant Stock Plan, which was adopted by the board of
      directors on May 9, 2005. On June and July 2005 we granted all the options
      exercisable at $0.01 (par value). The options were exercised.

      25. On June and July 2005 the Company received a short term loan of
      $100,000 from GFC Venture Partners LP (the "lender"), a related party. To
      secure the loan the Company issued warrants for a total of 1,000,000
      shares of Class A Common Stock at an exercise price of the amount equal to
      the principal and interest due under the short term loan divided by the
      number of shares of Common Stock issuable upon exercise of the warrants.
      The Company failed to make payments due under the loan agreement and as a
      result the warrants were exercised on September 26, 2005, in consideration
      for $101,377 which is the amount of the principal and interest due under
      the loan agreement on the date of the exercise of the warrants. Exercise
      of the Warrants was the lender's exclusive remedy for the Company's
      failure to make the payments on the short term loan.

NOTE 10 - REVENUES

      A. Main customers:

                                                Year ended December 31
                                        ----------------------------------------
                                        2 0 0 5         2 0 0 4          2 0 0 3
                                        -------         -------          -------
 Customers:
A                                       $    --         $   990          $    --
                                        =======         =======          =======
B                                       $    --         $    --          $42,724
                                        =======         =======          =======
C                                       $    --         $    --          $26,473
                                        =======         =======          =======
D                                       $    --         $    --          $    --
                                        =======         =======          =======

      B. Data by geographical regions:

                                                Year ended December 31
                                        ----------------------------------------
                                        2 0 0 5         2 0 0 4          2 0 0 3
                                        -------         -------          -------
Sales distribution, by target market:
Israel                                  $    --         $ 1,557          $13,689
U.S.A                                        --              --           42,724
Europe                                       --             990           26,473
                                        -------         -------          -------
                                        $    --         $ 2,547          $82,886
                                        =======         =======          =======


                                      F-23
<PAGE>

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

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 5    2 0 0 4    2 0 0 3        2 0 0 5
                                                     --------   --------   --------   ---------------
<S>                                                  <C>        <C>        <C>        <C>
Materials                                            $     --   $  3,979   $ 33,847   $       420,128
Salaries and related expenses                              --         --      7,865            81,340
Sub-contractors                                            --         --         --            50,783
Non-cash compensation expenses                             --         --         --            20,025
Other                                                      --         --      8,996            63,653
                                                     --------   --------   --------   ---------------
                                                     $     --   $  3,979   $ 50,708   $       635,929
                                                     ========   ========   ========   ===============
</TABLE>

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 5    2 0 0 4    2 0 0 3        2 0 0 5
                                                     --------   --------   --------   ---------------
<S>                                                  <C>        <C>        <C>        <C>
Salaries and related expenses                        $     --   $     --   $  8,214   $       882,533
Sub-contractors                                            --         --         --           387,921
Materials                                                  --         --         --            87,598
Non-cash compensation expenses                             --         --         --            57,004
Other                                                      --         --      2,645           375,603
                                                     --------   --------   --------   ---------------
                                                           --         --     10,859         1,790,659
Less:
Participation from Government funds                        --         --         --          (704,350)
Grants received                                            --         --         --            39,244
                                                     --------   --------   --------   ---------------
                                                     $     --   $     --   $ 10,859   $     1,125,553
                                                     ========   ========   ========   ===============
</TABLE>


                                      F-24
<PAGE>

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

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 5    2 0 0 4    2 0 0 3        2 0 0 5
                                                     --------   --------   --------   ---------------
<S>                                                  <C>        <C>        <C>        <C>
Marketing, General & Administrative
Salaries and related expenses                        $     --   $     --   $     --   $       410,351
Advertising and marketing costs                         1,175      6,530     13,093           194,720
Depreciation                                               --      5,727      8,680           122,469
Non-cash compensation expenses                         82,636    183,629      1,000           499,236
Professional services                                  50,771     62,854     86,004           382,271
Office expenses                                         3,578     20,662     13,968           176,681
Management fees                                        40,000     40,000     40,000           201,615
Car maintenance                                            --     16,874     15,885            92,545
Others                                                 (4,776)    (6,647)     9,858            90,904
                                                     --------   --------   --------   ---------------
                                                     $173,384   $329,629   $188,488   $     2,170,792
Less: expenses attributed to
research and development expenses                          --         --         --          (335,862)
                                                     --------   --------   --------   ---------------
                                                     $173,384   $329,629   $188,488   $     1,834,930
                                                     ========   ========   ========   ===============
</TABLE>

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 5    2 0 0 4    2 0 0 3        2 0 0 5
                                                     --------   --------   --------   ---------------
<S>                                                  <C>        <C>        <C>        <C>
Financial expenses to banks                          $ 14,961   $134,960   $ 45,541   $       372,625
Interest to related party                                  --         --         --            42,986
Amortization of debt issuance
costs                                                      --         --         --           168,561
                                                     --------   --------   --------   ---------------
                                                     $ 14,961   $134,960   $ 45,541   $       584,172
                                                     ========   ========   ========   ===============
</TABLE>


                                      F-25
<PAGE>

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

NOTE 15 - OTHER INCOME, NET

      In 2005 it consists of a supplier waived debt in the amount of $103,834.
      In it 2004 consists of profit from sales to a related party. In 2003 -
      profit from sales and consulting to a related party.

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 5         2 0 0 4
                                                 ---------       ---------

      Loss carry-forwards                        $ 672,514       $ 705,201
      Other temporary differences                    4,159           4,159
                                                 ---------       ---------
                                                   676,673         709,360
      Less: valuation allowance                   (676,673)        709,360
                                                 ---------       ---------
                                                 $      --       $      --
                                                 =========       =========

      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, 2005, the Company and the Subsidiary had carry-forward
      tax losses generated in the U.S. and in Israel of approximately $700,000
      and $1,150,000 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.


                                      F-26
<PAGE>

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

NOTE 17 - RELATED PARTY TRANSACTIONS

                                                    Year ended December 31
                                               ---------------------------------
                                               2 0 0 5      2 0 0 4      2 0 0 3
                                               -------      -------      -------

Related parties
Expenses -
Purchase of materials                          $    --      $    --      $    --
                                               =======      =======      =======
Sub-contractors                                $    --      $    --      $    --
                                               =======      =======      =======
Travel expenses                                $    --      $ 2,987      $    --
                                               =======      =======      =======
Salaries and related expenses                  $    --      $    --      $    --
                                               =======      =======      =======
Management fees                                $40,000      $40,000      $40,000
                                               =======      =======      =======
Other income, net                              $    --      $ 2,329      $    --
                                               =======      =======      =======


                                      F-27
<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 May 17, 2006.

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 hundreds computer-embedded
systems for avionics and military applications.

      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.

      Our audit committee is the board of directors. We have no independent
financial expert in the board 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, 2005.


                                       12
<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           2005    $40,000         0                    0
                                 2004    $40,000         0                    0
                                 2003    $15,000         0                    0
</TABLE>

Employment and Management Agreements

      Arie Hinkis is employed by us pursuant to an employment agreement dated
July 3, 2002.

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 May 17, 2006 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 12,022,977 shares of
Class A Common Stock and 744 shares of Class B Common Stock outstanding as of
May 17, 2006.


                                       13
<PAGE>

<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             Class B Common Stock                      744             100%
director
------------------------------------------------------------------------------------------------------
Arie Hinkis, President and             Class A Common Stock            1,176,986 (3)            8.92%
director
------------------------------------------------------------------------------------------------------
Nathan Tarter                          Class A common stock                  673,203             5.6%
c/o Nir-Or Israel Ltd
11 Haamal St.,
Rosh Haayein 48092
Israel
------------------------------------------------------------------------------------------------------
Ofer Yonach c/o Nir-Or Israel Ltd      Class A common stock                1,943,889           16.17%
11 Haamal St.,
Rosh Haayein 48092
Israel
------------------------------------------------------------------------------------------------------
GFC Venture Partners LP                Class A common stock                1,572,000           13.07%
c/o Andrew Thorburn
4 Mountain Laurel
Dove Canyon, CA 92679
------------------------------------------------------------------------------------------------------
Andrew Thorburn(4)                     Class A common stock                1,237,000           10.29%
4 Mountain Laurel
Dove Canyon, CA 92679
------------------------------------------------------------------------------------------------------
</TABLE>

(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) After conversion of B shares.

(4) Mr. Thorburn is president of GFC, Inc., the general partner of GFC Venture
Partners LP.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Not applicable.

ITEM 13. 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.



                                       14
<PAGE>

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.


                                       15
<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: May 17, 2006
                                                       /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: May 17, 2006
                                                       /s/ Nathan Tarter
                                                       -----------------
                                                     Nathan Tarter, Director


                                       16