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**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D. C. 20549**





**FORM
      10-KSB/A**





x
            Annual
                report under Section 13 or 15 (d) of the Securities Exchange Act
                of 1934
                for the fiscal year ended December 31,
                2005


o
            Transition
                report under Section 13 or 15 (d) of the Securities Exchange Act
                of 1934
                for the transition period from _____________to
                _____________





**Commission
      File Number: 000-50813**





**SAND
      HILL IT SECURITY ACQUISITION CORP.**


(Name
      of
      Small Business Issuer in Its Charter)


**Delaware**
              (State
                or Other Jurisdiction of Incorporation or Organization)
              
              **3000
                Sand Hill Road**
              **Building
                1, Suite 240**
              **Menlo
                Park, California**
              (Address
                of Principal Executive Offices)
            
            **20-0996152**
              (I.R.S.
                Employer
              Identification
                No.)
              
              
              **94025**
              (Zip
                code)


**(650)
      926-7022**


(Issuer’s
      Telephone Number, Including Area Code)





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


None


(Title
      of
      class)





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


Units
      consisting of one share of Common Stock,


par
      value
      $.01 per share, and two Warrants


Common
      Stock, $.01 par value per share


Warrants
      to purchase shares of Common Stock


(Title
      of
      class)





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 registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90
      days.




Yes
x   No
o




Indicate
      by checkmark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is not contained in this form, and will not be contained, to
      the
      best of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. x




Indicate
      by checkmark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).




Yes
x   No
o




State
      issuer’s revenues for its most recent fiscal year: None




The
      aggregate market value of the voting and non-voting stock held by non-affiliates
      of the registrant as of March 8, 2006, was approximately $21.7 million. For
      purposes of this computation, all executive officers, directors and 10%
      stockholders were deemed affiliates. Such a determination should not be
      construed as an admission that such executive officers, directors or 10%
      stockholders are affiliates.




As
      of
      March 8, 2006, 5,110,000 shares of common stock, par value $.01 per share,
      were issued and outstanding.




Transitional
      Small Business Disclosure Format: Yes o  No
x







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Sand
      Hill
      IT Security Acquisition Corp., a Delaware corporation (the “Company”), hereby
      amends, as set forth herein, the Company’s Annual Report on Form 10-KSB filed
      with the Securities and Exchange Commission on March 17, 2006 (the “Form
      10-KSB”). The item numbers and responses thereto are in accordance with the
      requirements of Form 10-KSB. All capitalized terms used and not otherwise
      defined herein shall have the meaning specified in the Form 10-KSB.




**SAND
      HILL IT SECURITY ACQUISITION CORP.**




Page**PART
                  I**Item
                  1. Description of Business
              1Item
                  2. Description of Property
              6Item
                  3. Legal Proceedings
              7Item
                  4. Submission of Matters to a Vote of Security
                  Holders
              7**PART
                  II**Item
                  5. Market for Common Equity and Related Stockholder
                  Matters
              7Item
                  6. Management’s Discussion and Analysis or Plan of
                  Operation
              9Item
                  7. Financial Statements
              11Item
                  8. Changes In and Disagreements With Accountants or
                  Accounting and Financial Disclosure
              25Item
                  8A. Controls and Procedures
              25**PART
                  III**Item
                  9. Directors, Executive Officers, Promoters and Control
                  Persons
              25Item
                  10. Executive Compensation
              28Item
                  11. Security Ownership of Certain Beneficial Owners
                  and Management
              28Item
                  12. Certain Relationships and Related
                  Transactions
              29Item
                  14. Principal Accounting Fees and
                  Services
              31**SIGNATURES**






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**PART
      I**




This
      report contains forward-looking statements within the meaning of Section 27A
      of
      the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E
      of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These
      forward-looking statements are subject to certain risks and uncertainties that
      could cause actual results to differ materially from historical results or
      anticipated results, including those set forth under “Management’s Discussion
      and Analysis or Plan of Operation” and elsewhere in, or incorporated by
      reference into, this report.




**Item
      1.   Description of Business**




**General**




Sand
      Hill IT Security Acquisition Corp. (the “Company”) is a blank check company
      formed to serve as a vehicle for the acquisition of a target business in a
      specified industry. Our objective is to acquire an operating business in the
      IT
      security industry. We were incorporated in Delaware on April 15, 2004. Our
      initial stockholders purchased 1,000,000 shares of common stock, $.01 par value,
      for $25,000. The registration statement for our initial public offering (the
      “Offering”) was declared effective July 26, 2004. We consummated the
      Offering on July 30, 2004. The net proceeds, after deducting the
      underwriters discount and offering expenses, and including the sale of 510,000
      units in the underwriters over-allotment option, was $22,022,462. $20,961,000
      of
      these net proceeds has been placed in a trust fund and invested in United States
      government securities. The funds held in the trust account will not be released
      until the earlier of the date on which we consummate a business combination
      or
      liquidate our assets.




**Current
      Trends in the Information Technology (IT) Security
      Industry**




The
      IT
      security market continues to be attractive from a business
      perspective. In
      January of 2006, the investment banking firm of Goldman Sachs reported that
      IT
      security continues as the highest spending priority amongst CIOs and CTOs in
      the
      U.S. for 2006. The industry is
      generally characterized by the following:




·
            escalating
                volume of Internet attacks on business, industry and government,
                reaching
                over 140,000 attacks in 2004;




·
            increasing
                sophistication of attacks and increasing cost per
                attack;




·
            material
                loss in employee productivity due to unauthorized Internet usage
                during
                working hours;




·
            significant
                recent increases in government and regulatory requirements specifically
                targeting security, including but not limited to, Sarbanes-Oxley
                (SOX),
                HIPPA, BASEL II, Gramm-Leach-Bliley, GISRA,
                etc;




·
            increases
                in customer demand for integrated, full solution product suites;
                and




·
            a
                strong preference in Small and Medium Enterprises for easy to install
                and
                easy to use security appliances.




Many
      organizations use the Internet to enable critical business applications that
      are
      accessed over their corporate networks. Many employees also use their
      organization’s computing resources for recreational “web surfing,” peer-to-peer
      file sharing, downloading of high-bandwidth content, instant messaging and
      other
      personal matters. However, unmanaged use of organizational computing and network
      resources, including Internet access, results in increased risk and cost to
      the
      organization, including increased security risks, loss of intellectual property,
      loss of a company’s customer and supplier data, lost employee productivity,
      increased network bandwidth consumption, and potential legal liability. This
      segment of IT security is commonly known as Secured Content Management, or
      SCM.




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Traditionally,
      organizations have attempted to mitigate the legal liability, productivity
      and
      bandwidth waste risks through written policies governing acceptable employee
      use
      of computing resources, and they have sought to protect against external
      security risks with a combination of firewalls, intrusion detection/prevention
      software and anti-virus software. With the growth in spyware, key logging
      applications, and phishing sites, combined with the rapid increase in employee
      use of instant messaging and peer-to-peer file sharing and the proliferation
      of
      blended attacks on computing networks, organizations are finding that existing
      security measures leave significant time and technology gaps in their
      protection. Written Internet access and software application use policies are
      easily ignored, difficult to enforce and do not proactively curtail undesirable
      Internet and software application usage. Firewalls can provide protection
      against external threats such as hacking, but do little to prevent employees
      from accessing unauthorized data from within an organization. Anti-virus
      software provides protection from e-mail borne viruses, but does not prevent
      the
      possible theft or corruption of corporate data by spyware and offers only
      limited protection against viruses that proliferate via peer-to-peer networks
      and instant messaging. Existing anti-virus and anti-spyware software also
      requires time to identify and reverse engineer the virus or spyware application
      before it can be remediated and removed from infected systems.




Given
      the
      necessity of corporate Internet access and the continuing adoption of the web
      as
      a mass communication, entertainment, information and commerce medium, we believe
      there is a significant opportunity for SCM solutions, including secure
      messaging, that effectively addresses the needs of organizations to manage
      employee usage of the computing environment, including Internet access and
      desktop application use. Additionally, although the web and e-mail are the
      primary drivers of Internet traffic today, the rapid emergence of
      Internet-enabled applications creates the need for software that applies
      management policies to file types, applications, and protocols, as well as
      web
      pages, at multiple points on the information technology infrastructure. Software
      tools are needed to implement policy-based bandwidth management and regulation
      of applications such as instant messaging, peer-to-peer file exchange tools,
      interactive games and desktop software applications. These solutions must also
      be adaptable enough to manage new applications and technologies as they are
      developed.




**Recent
      Developments**




On
      October 26, 2005 we entered into a definitive Agreement and Plan of Merger,
      as
      amended, with St. Bernard Software, Inc., a Delaware corporation
      (“St. Bernard”). Pursuant to the merger agreement, Sand Hill Merger Corp.,
      a Delaware corporation and wholly-owned subsidiary of the Company will merge
      with and into St. Bernard and St. Bernard will be the surviving
      corporation and become a wholly-owned subsidiary of the Company. At the
      effective time and as a result of the merger, the holders of St. Bernard
      common stock will receive, subject to a working capital adjustment,
      approximately 9.76 million shares of our common stock and the holders of
      St. Bernard options and warrants will receive options and warrants for
      approximately 1.12 million shares of our common stock.




St.
      Bernard Software is a recognized independent supplier of IT security software
      products and services, with a special emphasis on Secure Content Management,
      or
      SCM, including secure messaging. St. Bernard’s products protect businesses,
      government organizations and educational institutions from cyber attack, improve
      worker productivity, reduce legal liability and assist in meeting regulatory
      requirements for data/privacy protection. St. Bernard’s network-attached
      security products are delivered as appliances that connect into the data path
      between the Internet gateway and a company’s local area network. St. Bernard’s
      system security products consist of software that is installed on workstations
      and servers. St. Bernard has approximately 8,000 customers supporting over
      3.5
      million device licenses, primarily comprised of small to medium sized
      businesses, educational institutions and governmental organizations. The
      products offered by St. Bernard include Open File Manager, a data protection
      product; UpdateEXPERT, a patch and settings management product; iPrism, Internet
      access management product; and ePrism, a secure messaging, e-mail filtering
      product. According to International Data Corporation, in September 2005, St.
      Bernard’s iPrism product line was the leading Internet filtering appliance,
      enabling customers to manage and control employee access to millions of web
      sites that are updated continuously as part of St. Bernard’s fee-based
      subscription service. Other St. Bernard’s products also have a subscription
      component that increases deferred revenue, thereby increasing revenue
      predictability.




For
      a
      more complete discussion of St. Bernard and our proposed business combination,
      including the risks that are applicable to us with respect to our acquisition
      of
      St. Bernard see our current report on Form 8-K filed with the Securities and
      Exchange Commission on October 27, 2005, as well as our registration statement
      on Form S-4 (No. 333-130412).




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*Opportunity
      for stockholder approval of business combination*




Prior
      to
      the completion of a business combination, we will submit the transaction to
      our
      stockholders for approval, even if the nature of the acquisition is such as
      would not ordinarily require stockholder approval under applicable state law.
      In
      connection with seeking stockholder approval of a business combination, we
      will
      furnish our stockholders with proxy solicitation materials prepared in
      accordance with the Exchange Act, which, among other matters, will include
      a
      description of the operations of the target business and audited historical
      financial statements of the business.




In
      connection with the vote required for any business combination, all of our
      initial stockholders, including all of our officers and directors, have agreed
      to vote the 1,000,000 shares of common stock they owned immediately prior to
      the
      Offering in accordance with the vote of the public stockholders owning a
      majority of the shares of our common stock sold in our initial public offering.
      This voting arrangement does not apply to shares included in units purchased
      in
      the Offering or purchased following the Offering in the open market by any
      of
      our initial stockholders, officers and directors. We will proceed with the
      business combination only if public stockholders who own at least a majority
      of
      the shares of common stock sold in the Offering vote in favor of the business
      combination and public stockholders owning less than 20% of the shares sold
      in
      the Offering exercise their conversion rights.




*Conversion
      rights*




At
      the
      time we seek stockholder approval of any business combination, we will offer
      each public stockholder the right to have their shares of common stock converted
      to cash if the stockholder votes against the business combination and the
      business combination is approved and completed. The actual per-share conversion
      price will be equal to the amount in the trust fund, inclusive of any interest,
      as of the record date for determination of stockholders entitled to vote on
      the
      business combination, divided by the number of shares sold in the Offering.
      With
      taking into account the interest earned on the trust fund, the current per-share
      conversion price, as of December 31, 2005, would be $5.29. An eligible
      stockholder may request conversion at any time after the mailing to our
      stockholders of the proxy statement and prior to the vote taken with respect
      to
      a proposed business combination at a meeting held for that purpose, but the
      request will not be granted unless the stockholder votes against the business
      combination and the business combination is approved and completed. Any request
      for conversion, once made, may be withdrawn at any time up to the date of the
      meeting. It is anticipated that the funds to be distributed to stockholders
      entitled to convert their shares who elect conversion will be distributed
      promptly after completion of a business combination. Public stockholders who
      convert their stock into their share of the trust fund still have the right
      to
      exercise the warrants that they received as part of the units. We will not
      complete any business combination if public stockholders, owning 20% or more
      of
      the shares sold in the Offering, exercise their conversion rights.




*Liquidation
      if no business combination*




If
      we
      have not completed a business combination by July 27, 2006, we will be
      dissolved and will distribute to all of our public stockholders, in proportion
      to their respective equity interests, an aggregate sum equal to the amount
      in
      the trust fund, inclusive of any interest, plus any remaining net assets of
      the
      Company. Our initial stockholders have waived their rights to participate in
      any
      liquidation distribution with respect to shares of common stock owned by them
      immediately prior to the Offering. There will be no distribution from the trust
      fund with respect to our warrants.




If
      we
      were to expend all of the net proceeds of the Offering, other than the proceeds
      deposited in the trust fund, and with taking into account the interest earned
      on
      the trust fund, the current per-share liquidation price, as of December 31,
      2005, would be $5.29. The proceeds deposited in the trust fund could, however,
      become subject to the claims of our creditors which could be prior to the claims
      of our public stockholders. There is no assurance that the actual per-share
      liquidation price will not be less than $5.29, due to claims of creditors.
      Humphrey P. Polanen, our chairman of the board and chief executive officer,
      has
      agreed pursuant to an agreement with us and the representatives of the
      underwriters in the Offering, that, if we liquidate prior to the consummation
      of
      a business combination, he will be personally liable to pay debts and
      obligations to vendors or other entities that are owed money by us for services
      rendered or products sold to us in excess of the net proceeds of the Offering
      not held in the trust account. There can be no assurance, however, that Mr.
      Polanen would be able to satisfy those obligations.




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If we
      are
      unable to complete a business combination by July 27, 2006, upon notice from
      us,
      the trustee of the trust account will commence liquidating the investments
      constituting the trust fund and will turn over the proceeds to the transfer
      agent for distribution to the stockholders. We anticipate that the instruction
      to the trustee would be given promptly after July 27, 2006.




Our
      public stockholders are entitled to receive funds from the trust fund only
      in
      the event of our liquidation or if the stockholders seek to convert their
      respective shares into cash upon a business combination that the stockholder
      voted against and which is actually completed by us. In no other circumstances
      shall a stockholder have any right or interest of any kind to or in the trust
      fund. There will be no distribution from the trust fund with respect to our
      warrants.




**Competition**




If
      we
      succeed in effecting the business combination with St. Bernard, there will
      be
      intense competition from competitors of St. Bernard in the IT security industry.
      For a more complete discussion of the risks that will be applicable to us
      following the business combination with St. Bernard, see our filings referred
      to
      above under “Recent Developments.” We cannot assure you that, subsequent to our
      business combination, we will have the resources or ability to compete
      effectively.




**Facilities**




We
      maintain our executive offices at 3000 Sand Hill Road, Building 1, Suite 240,
      Menlo Park, California 94025. The cost for this space is included in the $7,500
      per-month fee Sand Hill Security, LLC charges us for general and administrative
      services pursuant to a letter agreement between us and Sand Hill Security,
      LLC.
      Sand Hill Security, LLC is an affiliate of certain of our directors and
      executive officers. We believe, based on rents and fees for similar services
      in
      the Menlo Park, California metropolitan area, that the fee charged by Sand
      Hill
      Security, LLC is at least as favorable as we could have obtained from an
      unaffiliated person. We consider our current office space adequate for our
      current operation.




**Employees**




We
      have
      three executive officers, each of whom are members of our board of directors.
      These individuals are not obligated to contribute any specific number of hours
      per week and intend to devote only as much time as they deem necessary to our
      affairs. The executive officers are also involved with business ventures other
      than the Company. We have no employees.




**Risks
      Associated with Our Business**




In
      addition to other information included in this report, you should consider
      all
      the risks relating to the proposed acquisition of St. Bernard and our operations
      following the business combination in our filings referred to above under
“Recent Developments”. In addition, the following factors should be considered
      in evaluating our business and future prospects.




*If
      we
      are unable to complete the business combination with St. Bernard, we will not
      have enough time to negotiate and consummate another business combination and
      will be required to liquidate.*




We
      must
      complete our business combination by July 27, 2006. Accordingly, if we are
      unable to complete the business combination with St. Bernard, we will not have
      enough time to negotiate and consummate another business combination. We will
      therefore be forced to liquidate our assets. If we are unable to complete a
      business combination and are forced to liquidate our assets, the per-share
      liquidation distribution could be less than the purchase price per share that
      purchasers paid for our securities because of the expenses of the Offering,
      our
      general and administrative expenses. Furthermore, there will be no distribution
      with respect to our outstanding warrants and, accordingly, the warrants will
      expire worthless if we liquidate before the completion of a business
      combination.




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*If
      third parties bring claims against us, the proceeds held in trust could be
      reduced and the per share liquidation price received by stockholders could
      be
      less than their purchase price per share.*




Our
      placing of funds in trust may not protect those funds from third party claims
      against us. The proceeds held in trust could be subject to claims which could
      take priority over the claims of our public stockholders. There can be no
      assurance that the per-share liquidation price will not be less than the
      purchase price per share that purchasers paid for our securities, plus interest,
      due to claims of creditors. If we liquidate before the completion of a business
      combination, Humphrey P. Polanen, our chairman of the board and chief executive
      officer, will be personally liable under certain circumstances to ensure that
      the proceeds in the trust fund are not reduced by the claims of various vendors
      or other entities that are owed money by us for services rendered or products
      sold to us. However, we cannot assure you that Mr. Polanen will be able to
      satisfy those obligations.




*Upon
      consummation of our business combination with St. Bernard, there will be a
      substantial number of shares of our common stock available for resale in the
      future that may increase the volume of common stock available for sale in the
      open market and may cause a decline in the market price of our common stock.*




The
      consideration to be issued in the merger with St. Bernard will include approximately
      9.76 million shares of our common stock and options and warrants for
      approximately 1.12 million shares of our common stock. Except for a portion
      of the shares that will be held by certain affiliates of St. Bernard and are
      subject to a lock-up period, the shares will be freely saleable immediately
      after the consummation of the merger. The presence of this additional number
      of
      shares of common stock eligible for trading in the public market may have an
      adverse effect on the market price of our common stock.




*Our
      initial stockholders, including our officers and directors, control a
      substantial interest in us and thus may influence certain actions requiring
      stockholder vote.*




All
      of
      our officers and directors own stock in our company, but have waived their
      right
      to receive distributions upon our liquidation with respect to their shares
      purchased prior to our initial public offering. Additionally, some of our
      officers and directors own warrants to purchase additional shares of our common
      stock. The shares and warrants owned by our directors and officers will be
      worthless if we do not consummate the business combination with St. Bernard.
      The
      personal and financial interests of our directors and officers may influence
      their motivation in accepting any changes or waiving any terms with respect
      to
      our business combination with St. Bernard. Consequently, our directors’ and
      officers’ discretion in agreeing to such changes or waivers may result in a
      conflict of interest when determining whether such changes or waivers are
      appropriate and in our stockholders’ best interest.




*Our
      outstanding warrants and options may have an adverse effect on the market price
      of our common stock and make it more difficult to effect a business combination.*




We
      currently have 8,820,000 shares of common stock reserved for issuance upon
      exercise of issued and outstanding warrants, the option to purchase 270,000
      units that we granted to the representatives of the underwriters in the Offering
      (including the warrants underlying the option), and the options to purchase
      an
      aggregate of 60,000 shares of common stock granted to Advisory Board members.
      To
      the extent we issue shares of common stock to effect a business combination,
      the
      potential for the issuance of substantial numbers of additional shares upon
      exercise of these warrants and options could make us a less attractive
      acquisition vehicle in the eyes of a target business as such securities, when
      exercised, will increase the number of issued and outstanding shares of our
      common stock, reduce the ownership the stockholders would have had excluding
      the
      shares issued from the exercise of warrants and options, and may reduce the
      value of the shares issued to complete the business combination. Accordingly,
      our warrants and options may make it more difficult to effectuate a business
      combination or increase the cost of the target business. Additionally, the
      sale,
      or even the possibility of sale, of the shares underlying the warrants and
      options could have an adverse effect on the market price for our securities
      or
      on our ability to obtain future public financing. If and to the extent these
      warrants and options are exercised, stockholders may experience dilution to
      their holdings.




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*If
      our initial stockholders exercise their registration rights, it may have an
      adverse effect on the market price of our common stock and the existence of
      theses rights may make it more difficult to effect a business combination.*




Our
      initial stockholders are entitled to demand that we register the resale of
      their
      shares of common stock at any time after the date on which their shares are
      released from escrow. If our initial stockholders exercise their registration
      rights with respect to all of their shares of common stock, then there will
      be
      an additional 1,000,000 shares of common stock eligible for trading in the
      public market. The presence of this additional number of shares of common stock
      eligible for trading in the public market may have an adverse effect on the
      market price of our securities. In addition, the existence of these rights
      may
      make it more difficult to effectuate a business combination, or may increase
      the
      cost of the target business, as the stockholders of the target business may
      be
      discouraged from entering into a business combination with us or will request
      a
      higher price for their securities as a result of these registration rights
      and
      the potential future effect their exercise may have on the trading market for
      our securities.




*If
      we
      are deemed to be an investment company, we may be required to institute
      burdensome compliance requirements and our activities may be restricted.*




If
      we are
      deemed to be an investment company under the Investment Company Act of 1940,
      we
      may have imposed upon us burdensome requirements, including:




**•**
            
            registration
                as an investment company;**•**
            
            adoption
                of a specific form of corporate structure; and**•**
            
            reporting,
                record keeping, voting, proxy and disclosure requirements and other
                rules
                and regulations.




We
      do not
      believe that our anticipated principal activities will subject us to the
      Investment Company Act of 1940. To this end, the proceeds held in trust have
      only been invested by the trust agent in “government securities” with specific
      maturity dates. By restricting the investment of the proceeds to these
      instruments, we intend to meet the requirements for the exemption provided
      in
      Rule 3a-1 promulgated under the Investment Company Act of 1940. If we were
      deemed to be subject to the act, compliance with these additional regulatory
      burdens would require additional expense that we have not allotted for.




*We
      may experience volatility in earnings due to how we are required to account
      for
      our warrants.*




Under
      EITF No. 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* (EITF
      No.
      00-19), the fair value of the warrants issued as part of the units issued in
      our
      initial public offering must be reported as a liability. The warrant agreement
      provides for us to register the shares underlying the warrants and is silent
      as
      to the penalty to be incurred in the absence of our ability to deliver
      registered shares to the warrant holders upon warrant exercise. Under EITF
      No.
      00-19, we are required to assume that this situation could give rise to us
      ultimately having to net-cash settle the warrants, thereby necessitating the
      treatment of the warrants as a liability. Further, EITF No. 00-19 requires
      us to
      record the warrant liability at each reporting date at its then estimated fair
      value, with any changes being recorded through our statement of operations
      as
      other income/expense. The warrants will continue to be reported as a liability
      until such time that they are exercised, expire, or we are otherwise able to
      modify the registration rights agreement to remove the provisions which require
      this treatment. As a result, we could experience volatility in our net income
      due to changes that occur in the value of the warrant liability at each
      reporting date.




**Item
      2.  Description of Property**




We
      maintain our executive offices at 3000 Sand Hill Road, Building 1, Suite 240,
      Menlo Park, California 94025. The cost for this space is included in the $7,500
      per-month fee Sand Hill Security, LLC charges us for general and administrative
      services pursuant to a letter agreement between us and Sand Hill Security,
      LLC.
      We believe, based on rents and fees for similar services in the Menlo Park,
      California metropolitan area, that the fee charged by Sand Hill Security, LLC
      is
      at least as favorable as we could have obtained from an unaffiliated person.
      We
      consider our current office space adequate for our current
      operation.




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**Item
      3. Legal Proceedings**




We
      are
      not presently a party to any pending legal proceeding.




**Item
      4.  Submission of Matters to a Vote of Security
      Holders**




There
      were no matters for submission to a vote of security holders during the fourth
      quarter ended December 31, 2005.




**PART
      II**




**Item
      5.Market for Common Equity and Related
      Stockholder Matters**




The
      units, common stock and warrants are listed on the **** OTC
      Bulletin Board under the symbols SHQCU, SHQC and SHQCW, respectively. The
      following table indicates the quarterly high and low bid price for the units,
      common stock and warrants on the OTC Bulletin Board for the periods indicated
      since such units began trading on July 27, 2004 and common stock and warrants
      began trading on August 24, 2004. Such inter-dealer quotations do not
      necessarily represent actual transactions, and do not reflect retail mark-ups,
      mark-downs or commissions.




OTC


BULLETIN
      BOARD


BID
      CLOSING PRICE




**Common
                Stock**
            
            **Warrants**
            
            **Units****Quarter
                Ended**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**March
                31, 2005
            
            $
            5.25
            
            $
            4.80
            
            $
            0.95
            
            $
            0.55
            
            $
            7.25
            
            $
            6.00June
                30, 2005
            
            $
            5.47
            
            $
            4.91
            
            $
            0.96
            
            $
            0.56
            
            $
            7.25
            
            $
            6.00September
                30, 2005
            
            $
            5.50
            
            $
            5.10
            
            $
            1.60
            
            $
            0.75
            
            $
            8.51
            
            $
            6.45December
                31, 2005
            
            $
            5.50
            
            $
            5.10
            
            $
            1.70
            
            $
            0.77
            
            $
            8.80
            
            $
            6.60




As
      of
      December 31, 2005, we had 1 holder of record of our units, 8 holders of
      record of our common stock, and 1 holder of record of our warrants.




We
      have
      not paid any dividends on our common stock to date and do not intend to pay
      dividends in the foreseeable future, but intend to retain earnings for future
      growth.




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*Equity
      Compensation Plan*




The
      following table provides information as of December 31, 2005, about our common
      stock that may be issued upon the exercise of options, warrants and rights
      under
      all of our existing equity compensation plans (including individual
      arrangements):




**Plan
                Category**
            
            **Number
                of securities to be**
              **issued
                upon exercise of**
              **outstanding
                options,**
              **warrants
                and rights**
              **(a)**
            
            **Weighted-average**
              **exercise
                price of**
              **outstanding
                options,**
              **warrants
                and rights**
              **(b)**
            
            **Number
                of securities remaining**
              **available
                for future issuance under**
              **equity
                compensation plans**
              **(excluding
                securities reflected in**
              **column
                (a))**
              **(c)**Equity
                compensation plans approved by security holders
            
            
            —
            
            
            —
            
            
            —Equity
                compensation plans not approved by security holders
            
            
            60,000
            
            $
            4.75
            
            
            40,000Total
            
            
            60,000
            
            $
            4.75
            
            
            40,000




In
      December, 2004, the Board of Directors of the Company authorized the Company
      to
      reserve 100,000 shares of common stock for issuance pursuant to the exercise
      of
      stock options to purchase shares of common stock at an exercise price of $4.75
      per share to be granted to certain individuals acting as advisors to the
      Company. In January, 2005, the Company granted options to purchase an aggregate
      of 60,000 shares of common stock at an exercise price of $4.75 per share to
      Robert Medrano, John Garvey, Lou Ryan and Raj Dhingra who have acted as advisors
      to the Company. These options will vest 50% one year from the grant of the
      option and 50% two years from the grant of the option and are exercisable for
      a
      period of five years from the date on which the options were granted; however,
      the options will not be exercisable prior to the consummation of a business
      combination by the Company.




*Recent
      Sales of Unregistered Securities*




In
      April
      2004, we sold the following shares of Common Stock without registration under
      the Securities Act:




**Stockholders**
            
            **Number of Shares**Humphrey
                Polanen
            
            
            459,441Sand
                Hill Security, LLC
            
            
            100,000Keith
                Walz
            
            
            174,825Scott
                Broomfield
            
            
            174,825Cary
                Grossman
            
            
            48,951Dan
                Johnson
            
            
            20,979Alberto
                Micalizzi
            
            
            20,979







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Such
      shares were issued in connection with our organization pursuant to the exemption
      from registration contained in Section 4(2) of the Securities Act as they were
      sold in a transaction not involving a public offering. The shares were sold
      at
      purchase prices of $0.025 per share.




On
      July
      30, 2004, we closed the Offering of 3,600,000 Units, with each Unit consisting
      of one share of our common stock and two warrants, each to purchase one share
      of
      our common stock at an exercise price of $5.00 per share. The Units were sold
      at
      an offering price of $6.00 per Unit, generating gross proceeds of $21,600,000.
      Additionally, the underwriters’ purchased 510,000 units, pursuant to the
      exercise of the over-allotment option granted in connection with the Offering,
      generating gross proceeds of $3,060,000. The representatives of the underwriters
      in the Offering were I-Bankers Securities Incorporated and Newbridge Securities
      Corporation. The securities sold in the Offering were registered under the
      Securities Act pursuant to a registration statement on Form S-1 (No.
      333-114861). The Securities and Exchange Commission declared the registration
      statement effective on July 26, 2004.




We
      paid a
      total of $2,250,900 in underwriting discounts and commissions, including
      $648,000 for the underwriters’ non-accountable expense allowance, and
      approximately $386,000 for other costs and expenses related to the
      Offering.




After
      deducting the underwriting discounts and commissions and the Offering expenses,
      the total net proceeds to us from the Offering were approximately $22,022,462,
      of which $20,961,000 was deposited into a trust fund and the remaining proceeds
      are available to be used to provide for business, legal and accounting due
      diligence on prospective business combinations and continuing general and
      administrative expenses. From inception through December 31, 2005, we have
      had negative cash flow from operations of $948,866 from the net proceeds that
      were not deposited into the trust fund to pay or accrue general and
      administrative expenses. The net proceeds deposited into the trust fund remain
      on deposit in the trust fund and have earned $780,492 in interest through
      December 31, 2005.




**Item
      6.  Management’s Discussion and Analysis or Plan
      of Operation**




The
      following discussion should be read in conjunction with the Financial
      Statements, including the notes thereto, included elsewhere in this
      report.




We
      were
      formed on April 15, 2004, to serve as a vehicle to effect a merger, capital
      stock exchange, asset acquisition or other similar business combination with
      an
      operating business in the IT security industry. We intend to utilize cash
      derived from the proceeds of the Offering, our capital stock, debt or a
      combination of cash, capital stock and debt, in effecting a business
      combination. We consummated the Offering on July 30, 2004.




Operations
      commenced July 31, 2004. The net loss of **** $49,907
      reported for the period from April 15, 2004 (inception) through
      December 31, 2004 consists primarily of $51,408 for director and officer
      liability and other insurance, $37,500 for facilities, $32,500 for professional
      fees, $34,360 for travel and travel related costs, and $36,178 for other
      operating expenses. Total interest income was $142,039.




As
      of
      December 31, 2005, the Company had cash of $73,596, and treasury securities
      in
      our trust account (including interest) of $21,730,543. From inception through
      December 31, 2005, we have had negative cash flow from operations of $948,866
      from the net proceeds that were not deposited into the trust fund. The
      cumulative net loss of $1,595,121 reported for the period from April 15, 2004
      (inception) through December 31, 2005 consists primarily of $174,772 for
      director and officer liability and other insurance, $127,500 for facilities,
      $562,657 for professional fees, $147,052 for travel and travel related costs,
      $103,733 for taxes, and $183,079 for other operating expenses and warrant
      liability expense of $1,076,820. The net proceeds deposited into the trust
      fund
      remain on deposit in the trust fund and have earned $780,492 in interest through
      December 31, 2005.




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Under
      EITF No. 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* (“EITF
      No. 00-19), the fair value of the warrants issued as part of the Units have
      been
      reported as a liability. The warrant agreement provides for the Company to
      register the shares underlying the warrants and is silent as to the penalty
      to
      be incurred in the absence of the Company’s ability to deliver registered shares
      to the warrant holders upon warrant exercise. Under EITF No. 00-19, the Company
      is required to assume that this situation could give rise to it ultimately
      having to net-cash settle the warrants, thereby necessitating the treatment
      of
      the warrants as a liability. Further, EITF No. 00-19 requires the Company to
      record the warrant liability at each reporting date at its then estimated fair
      value, with any changes being recorded through the Company’s statement of
      operations as other income/expense. The warrants will continue to be reported
      as
      a liability until such time that they are exercised, expire, or the Company
      is
      otherwise able to modify the registration rights agreement to remove the
      provisions which require this treatment. As a result, the Company could
      experience volatility in its net income due to changes that occur in the value
      of the warrant liability at each reporting date.




The
      Company had previously issued financial statements which did not present the
      warrants as a liability. The accompanying financial statements have been
      restated to correct this error.




For
      the
      twelve months ended December 31, 2005, the Company earned interest income of
      $638,453. Sand Hill incurred operating expenses of approximately $1,106,847
      for
      that same period. These expenses consist primarily of $123,364 for director
      and
      officer liability and other insurance, $90,000 for facilities, $530,157 for
      professional fees, $112,692 for travel and travel related costs, $103,733 for
      taxes, and $146,901 for other operating expenses and costs associated with
      being
      a public company.




Over
      the
      24-month period subsequent to the consummation of the Offering, the Company
      had
      anticipated approximately $250,000 of expenses for legal, accounting and other
      expenses related to the due diligence investigations, and structuring and
      negotiating of a business combination, $180,000 for the administrative fee
      payable to Sand Hill Security, LLC ($7,500 per month for two years), $100,000
      of
      expenses for the due diligence and investigation of a target business, $75,000
      of expenses in legal and accounting fees relating to our SEC reporting
      obligations and $475,000 for general working capital to be used for
      miscellaneous expenses and reserves, including approximately $180,000 for
      director and officer liability insurance premiums, inclusive of the amounts
      set
      out in the preceding paragraph. We do not
      believe that the Company has sufficient available cash resources outside of
      the
      trust fund to operate until the merger is consummated, without accruing for
      certain professional expenses, such as legal and accounting costs and,
      therefore, we may
      need
      to raise additional funds through a private offering of debt or equity
      securities if such funds are required to consummate the business combination
      with St. Bernard. Anticipating
      closure of the merger by the end of May, 2006, Sand Hill estimates total costs
      to consummation of approximately $15,000 for the administrative fee payable
      to
      Sand Hill Security LLC, $10,000 for accounting fees relating to quarterly SEC
      reporting obligations, $40,000 for legal costs related to the joint proxy
      statement/prospectus and registration statement on Form S-4, $25,000 in
      printing costs for the joint proxy statement/prospectus and registration
      statement on Form S-4, plus an additional $30,000 in travel costs, investor
      relations costs and general corporate working capital requirements. This is
      a
      total estimate of $120,000 to operate until the consummation of a business
      combination. To the extent that these costs exceed amounts available outside
      the
      trust fund, trust fund assets will be used to fund the excess costs of the
      merger if the merger is completed and the trust fund assets are released to
      the
      Company.




On
      October 26, 2005 we entered into a definitive Agreement and Plan of Merger,
      as
      amended, with St. Bernard. Pursuant to the Merger Agreement, Sand Hill
      Merger Corp., a Delaware corporation and wholly-owned subsidiary of the Company
      will merge with and into St. Bernard and St. Bernard will be the
      surviving corporation and become a wholly-owned subsidiary of the Company.
      At
      the effective time and as a result of the merger, the holders of
      St. Bernard common stock will receive, subject to a working capital
      adjustment, approximately 9.76 million shares of our common stock and the
      holders of St. Bernard options and warrants will receive options and
      warrants for approximately 1.12 million shares of our common stock.




For
      a
      more complete discussion of St. Bernard and our proposed business combination,
      including the risks that are applicable to us with respect to our acquisition
      of
      St. Bernard see our current report on Form 8-K filed with the Securities and
      Exchange Commission on October 27, 2005, as well as our registration statement
      on Form S-4 (No. 333-130412).




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We
      are
      obligated, commencing July 26, 2004, to pay to Sand Hill Security, LLC, an
      affiliate of our directors and executive officers, a monthly fee of $7,500
      for
      general and administrative services. In addition, in April 2004, Sand Hill
      Security, LLC advanced an aggregate of $40,000 to us, on a non-interest bearing
      basis, for payment of offering expenses on our behalf. This amount was repaid
      in
      August 2004 out of the proceeds of the Offering.




*Off-balance
      Sheet Arrangements*




There
      were no off-balance sheet arrangements during the period from April 15,
      2004 (inception) through December 31, 2005, that have or are reasonably
      likely to have a current or future effect on our financial condition, changes
      in
      financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures, or capital resources that is material to our
      investors.




**Item
      7. Financial Statements**




*Report
      of Independent Certified Public Accounts*




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REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






To
      the
      Board of Directors of


Sand
      Hill
      IT Security Acquisition Corp.




We
      have
      audited the accompanying balance sheets of Sand Hill IT Security Acquisition
      Corp. (a corporation in the development stage) as of December 31, 2004 and
      2005,
      and the related statement of operations, stockholders’ equity and cash flows for
      the period from April 15, 2004 (inception) to December 31, 2004, and for the
      year ended 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 auditing standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company has
      determined that it is not required to have, nor were we engaged to perform,
      an
      audit of its internal control over financial reporting. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provides a reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Sand Hill IT Security Acquisition
      Corp. at December 31, 2004 and 2005, and the results of its operations and
      their
      cash flows for the period from April 15, 2004 (inception) to December 31, 2004,
      and for the year ended December 31, 2005, in conformity with accounting
      principles generally accepted in the United States of America.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in note 10 to the financial
      statements, the Company has suffered significant losses and has a working
      capital deficit (net of Treasury Bill Held in Trust) of $169,570 at December
      31,
      2005 and does not have any remaining due diligence funds to satisfy its current
      obligations, which matters raise substantial doubt about its ability to continue
      as a going concern. Management’s plans in regard to these matters are also
      described in note 10. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




As
      discussed in Note 1 to the financial statements, the Company has restated the
      accompanying financial statements to reflect the warrants outstanding in
      connection with the Company’s initial public offering as a
      liability.




/s/
      HEIN
& ASSOCIATES LLP




March
      14,
      2006 (except for paragraphs 4, 5 and 6 of Note 1, to which the date is June
      19,
      2006)


Houston,
      Texas




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**SAND
      HILL IT SECURITY ACQUISITION CORP.**




**(A
      Corporation in the Development Stage)**




**BALANCE
      SHEETS**




**ASSETS**
            
            **Restated**
              **December
                31, 2005**
            
            **Restated**
              **December
                31, 2004****Current
                assets:**Cash
            
            $
            73,596
            
            $
            783,133Treasury
                bill held in trust
            
            
            21,730,543
            
            
            21,100,510Prepaid
                expenses
            
            
            11,789
            
            
            132,131Total
                current assets
            
            
            21,815,928
            
            
            22,015,774**Total
                Assets**
            
            **$**
            **21,815,928**
            
            **$**
            **22,015,774****LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                Liabilities:**Accounts
                payable and accrued expenses
            
            $
            254,955
            
            $
            15,772Warrant
                liability
            
            $
            6,419,820
            
            $
            5,343,000**Total
                Current Liabilities**
            
            $
            6,674,775
            
            $
            5,358,772**Total
                Liabilities**
            
            $
            6,674,775
            
            $
            5,358,772Common
                stock subject to shareholder’s right to conversion;821,589
                shares at conversion value
            
            
            4,343,935
            
            
            4,217,992**Stockholders’
                Equity:**Preferred
                stock, $0.01 par value
              Authorized
                5,000,000 shares; none issued
            
            
            —
            
            
            —Common
                stock, $0.01 par valueAuthorized
                50,000,000 sharesIssued
                and outstanding, 5,110,000 (including the 821,589 subject to conversion)
                and 1,000,000 shares, respectively
            
            
            42,884
            
            
            42,884Additional
                paid-in capital
            
            
            12,349,455
            
            
            12,446,033Deficit
                accumulated during the development stage
            
            
            (1,595,121
            )
            
            (49,907
            )**Total
                Stockholders’ Equity**
            
            
            10,797,218
            
            
            12,439,010**Total
                Liabilities and Stockholders’ Equity**
            
            **$**
            **21,815,928**
            
            **$**
            **22,015,774**







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**SAND
      HILL IT SECURITY ACQUISITION CORP.**




**(A
      Corporation in the Development Stage)**




**STATEMENTS
      OF OPERATION**




Restated
              Twelve
                months ended
              December
                31, 2005
            
            Period
                from April 15, 2004 (inception) to
              December
                31, 2004
            
            Restated
              Period
                from April 15, 2004 (inception)
              to
              December
                31, 2005Professional
                Fees
            
            $
            (530,157
            )
            $
            (32,500
            )
            $
            (562,657
            )Facilities
            
            
            (90,000
            )
            
            (37,500
            )
            
            (127,500
            )Director
                and Officer Insurance
            
            
            (123,364
            )
            
            (51,408
            )
            
            (174,772
            )Travel,
                Lodging and Meals
            
            
            (112,692
            )
            
            (34,360
            )
            
            (147,052
            )State
                Franchise Taxes.
            
            
            (103,733
            )
            
            —
            
            
            (103,733
            )Other
                Operating Expense
            
            
            (146,901
            )
            
            (36,178
            )
            
            (183,079
            )**Operating
                loss**
            
            
            **(1,106,847**
            **)**
            
            **(191,946**
            **)**
            
            **(1,298,793**
            **)**Interest
                income
            
            
            638,453
            
            
            142,039
            
            
            780,492Warrant
                liability expense
            
            
            (1,076,820
            )
            
            —
            
            
            (1,076,820
            )**Net
                loss**
            
            **$**
            **(1,545,214**
            **)**
            **$**
            **(49,907**
            **)**
            **$**
            **(1,595,121**
            **)**Weighted
                Average Shares Outstanding
            
            
            5,110,000
            
            
            3,468,784
            
            
            4,433,893Net
                Loss Per Share (Basic and Diluted)
            
            $
            (0.30
            )
            $
            (0.01
            )
            $
            (0.36
            )










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**SAND
      HILL IT SECURITY ACQUISITION CORP.**




**(A
      Corporation in the Development Stage)**




**STATEMENTS
      OF CASH FLOW**




**Restated**
              **For
                the twelve months ending December 31, 2005**
            
            **Restated**
              **Period
                from April 15, 2004 (inception) to December 31,
                2004**
            
            **Restated**
              **Period
                from April 15, 2004 (inception) to December 31,
                2005**CASH
                FLOW FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (1,545,214
            )
            $
            (49,907
            )
            $
            (1,595,121
            )Stock
                compensation related to issuance of Advisory Board options
            
            
            29,364
            
            
            2,447
            
            
            31,811Accretion
                of treasury bill
            
            
            (630,033
            )
            
            (75,510
            )
            
            (705,543
            )Decrease
                (Increase) in prepaid expenses
            
            
            120,342
            
            
            (132,131
            )
            
            (11,788
            )Increase
                in accounts payable and accrued expenses
            
            
            239,183
            
            
            15,772
            
            
            254,955Increase
                in warrant liability
            
            
            1,076,820
            
            
            —
            
            
            1,076,820Net
                cash provided by (used) in operating activities
            
            
            (709,536
            )
            
            (239,329
            
            
            (948,866
            )CASH
                FLOW FROM INVESTING ACTIVITIESPurchase
                of treasury bill in trust account
            
            
            —
            
            
            (21,025,000
            )
            
            (21,025,000
            )Net
                cash used in investing activities
            
            
            —
            
            
            (21,025,000
            )
            
            (21,025,000
            )CASH
                FLOW FROM FINANCING ACTIVITIESProceeds
                from sale of common stock to initial stockholders
            
            
            
            
            
            25,000
            
            
            25,000Gross
                proceeds from public offering
            
            
            —
            
            
            24,660,000
            
            
            24,660,000Costs
                of public offering
            
            
            —
            
            
            (2,637,538
            )
            
            (2,637,538
            )Proceeds
                from stockholder loan
            
            
            —
            
            
            40,000
            
            
            40,000Repayment
                of stockholder loan
            
            
            —
            
            
            (40,000
            )
            
            (40,000
            )Net
                cash provided by financing activities
            
            
            —
            
            
            22,047,462
            
            
            22,047,462NET
                INCREASE (DECREASE) IN CASH
            
            
            (709,537
            )
            
            783,133
            
            
            73,596CASH
                AT BEGINNING OF PERIOD
            
            
            783,133
            
            
            —
            
            
            —CASH
                AT END OF PERIOD
            
            $
            73,596
            
            $
            783,133
            
            $
            73,596









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**SAND
      HILL IT SECURITY ACQUISITION CORP.**




**(A
      Corporation in the Development Stage)**




**STATEMENT
      OF STOCKHOLDERS’ EQUITY**




**Restated**




PreferredStock
            
            Common
                Stock
              Shares
            
            Common
                Stock
              Amount
            
            AdditionalPaid-In
              Capital
            
            Deficit
                Accumulated during the DevelopmentStage
            
            TotalBalance,
                April 15, 2004 (inception)
            
            $
            —
            
            
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Sale
                of 1,000,000 shares of common stock to initial stockholders at $0.025
                per
                share
            
            
            
            
            
            1,000,000
            
            $
            10,000
            
            $
            15,000
            
            
            
            
            $
            25,000Sale
                of 3,600,000 shares of common stock to public stockholders at $6.00
                per
                share, net of underwriters’ discount and offering expenses of
                $2,637,538
            
            
            
            
            
            3,600,000
            
            $
            36,000
            
            $
            18,926,462
            
            
            
            
            $
            18,962,462Sale
                of 510,000 shares of common stock to underwriters at $6.00 per
                share
            
            
            
            
            
            510,000
            
            $
            5,100
            
            $
            3,054,900
            
            
            
            
            $
            3,060,000Amortization
                of Advisory Board Compensation
            
            
            
            
            
            
            
            
            
            
            $
            2,447
            
            
            
            
            $
            2,447Reduction
                of capital related to the warrant liability
            
            
            
            
            
            
            
            
            
            
            
            (5,343,000
            )
            
            
            
            
            (5,343,000
            )Reduction
                of capital related to the common stock subject to possible conversion(821,589
                shares at conversion value)
            
            
            
            
            
            
            
            $
            (8,216
            )
            $
            (4,194,682
            )
            
            
            
            $
            (4,202,898
            )Increase
                in value of shares of common stock subject to possible
                conversion
            
            
            
            
            
            
            
            
            
            
            $
            (15,094
            )
            
            
            
            $
            (15,094
            )**Net
                loss for the period April 15, 2004 (inceptio**n)
                to December 31, 2004
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (49,907
            )
            $
            (49,907
            )**Balance,
                December 31, 2004**
            
            **$**
            —
            
            
            **5,110,000**
            
            **$**
            **42,884**
            
            **$**
            **12,446,033**
            
            **$**
            **(49,907**
            **)**
            **$**
            **12,439,010**Amortization
                of Advisory Board Compensation
            
            
            
            
            
            
            
            
            
            
            $
            29,364
            
            
            
            
            $
            29,364Increase
                in value of shares of common stock subject to possible
                conversion
            
            
            
            
            
            
            
            
            
            
            $
            (125,942
            )
            
            
            
            $
            (125,942
            )**Net
                loss for twelve months ending**December 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (1,545,214
            )
            $
            (1,545,214
            )**Balance,
                December 31, 2005**
            
            **$**
            —
            
            
            **5,110,000**
            
            **$**
            **42,884**
            
            **$**
            **12,349,455**
            
            **$**
            **(1,595,121**
            **)**
            **$**
            **10,797,218**






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**SAND
      HILL IT SECURITY ACQUISITION CORP.**




**(A
      Corporation in the Development Stage)**




**NOTES
      TO FINANCIAL STATEMENTS**




**1.** **ORGANIZATION,
      BUSINESS OPERATIONS**




Sand
      Hill
      IT Security Acquisition Corp. was incorporated in Delaware on April 15, 2004
      as
      a blank check company whose objective is to merge with or acquire an operating
      business in the IT Security industry. The Company’s initial stockholders’
purchased 1,000,000 shares of common stock, $0.01 par value, for $25,000 on
      April 20, 2004.




The
      registration statement for the Company’s initial public offering (the
“Offering”) was declared effective on July 26, 2004. The Company consummated the
      Offering on July 30, 2004 and received proceeds, net of the underwriters’
discount of $22,022,462, which includes proceeds of $2,861,100 received from
      the
      exercise by the underwriters of the over allotment option. The Company’s
      management has broad discretion with respect to the specific application of
      the
      net proceeds of the Offering, although substantially all of the net proceeds
      of
      the Offering are intended to be generally applied toward consummating a merger
      with or acquisition of an operating business in the IT security industry
      (“Business Combination”). There is no assurance that the Company will be able to
      successfully affect a Business Combination. A treasury bill of $21,025,000
      was
      purchased at a discount for $20,961,000 with funds initially deposited in an
      interest bearing trust account (“Trust Fund”) and is being held until the
      earlier of (i) the consummation of its first Business Combination or (ii)
      liquidation of the Company. Under the agreement governing the Trust Fund, funds
      may only be invested in United States government securities with a maturity
      of
      180 days or less. The trust fund balance has been invested in a United States
      Treasury Bill, which is accounted for as a trading security and is recorded
      at
      its market value of approximately $21,730,543 at December 31, 2005. The
      excess of market value over cost is included in interest income in the
      accompanying Statement of Operations. The remaining proceeds of the Offering
      may
      be used to pay for business, legal and accounting due diligence on prospective
      mergers or acquisitions and continuing general and administrative
      expenses.




Under
      EITF No. 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* (“EITF
      No. 00-19”), the fair value of the warrants issued as part of the Units have
      been reported as a liability. The warrant agreement provides for the Company
      to
      register the shares underlying the warrants and is silent as to the penalty
      to
      be incurred in the absence of the Company’s ability to deliver registered shares
      to the warrant holders upon warrant exercise. Under EITF No. 00-19, the Company
      is required to assume that this situation could give rise to it ultimately
      having to net-cash settle the warrants, thereby necessitating the treatment
      of
      the warrants as a liability. Furthermore, EITF No. 00-19 requires the Company
      to
      record the warrant liability at each reporting date at its then estimated fair
      value, with any changes being recorded through the Company’s statement of
      operations as other income/expense. The warrants will continue to be reported
      as
      a liability until such time that they are exercised, expire, or the Company
      is
      otherwise able to modify the registration rights agreement to remove the
      provisions which require this treatment.




The
      fair
      value of the warrant liability in the accompanying balance sheet has been
      determined using the trading value of the warrants. The value assigned to the
      fair value of the warrant liability at July 30, 2004 (date of issuance),
      December 31, 2004, and December 31, 2005 was $5,343,000, $5,343,000, and
      $6,419,820, respectively.





Amounts
      reported as warrant liability expense in the accompanying statement of
      operations resulting from the change in valuation of the warrant liability
      was
      $0 and $1,076,820 for 2004 and 2005, respectively.




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The
      Company had previously issued financial statements which did not present the
      warrants as a liability. The accompanying financial statements have been
      restated to correct this error. The impact of the correction of this error
      in
      previously reported financial statements is as follows:




**2004**
              
              As
                  of September 30, 2004
              
              As
                  of December 31, 2004As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  RestatedTotal
                  Assets
              
              $
              22,045,626
              
              $
              22,045,626
              
              $
              22,015,774
              
              $
              22,015,774Total
                  Liabilities
              
              $
              13,772
              
              $
              4,452,572
              
              $
              15,772
              
              $
              5,358,772Common
                  Stock Subject to Conversion
              
              $
              4,199,392
              
              $
              4,199,392
              
              $
              4,217,992
              
              $
              4,217,992Stockholders’
                  Equity
              
              $
              17,832,472
              
              $
              13,393,672
              
              $
              17,782,010
              
              $
              12,439,010





For
                  the Three-Month
                Period
                  Ended September 30, 2004
              
              For
                  the Three-Month
                Period
                  EndedDecember
                  31, 2004As
                  Previously
                Reported
              
              As
                  Restated
              
              As
                  Previously
                Reported
              
              As
                  RestatedWarrant
                  liability Income (Expense)
              
              $
              —
              
              $
              904,200
              
              $
              —
              
              $
              (904,200
              )Net
                  Income (Loss)
              
              $
              (3,680
              )
              $
              900,520
              
              $
              (46,227
              )
              $
              (950,427
              )Net
                  Income Per Share-Basic
              
              $
              0.00
              
              $
              0.24
              
              $
              (0.01
              )
              $
              (0.19
              )Net
                  Income Per Share-Diluted
              
              $
              0.00
              
              $
              0.00
              
              $
              (0.01
              )
              $
              (0.19
              )






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**2005**
              
              As
                  of March 31, 2005
              
              As
                  of June 30, 2005
              
              As
                  of September 30, 2005
              
              As
                  of December 31, 2005As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  RestatedTotal
                  Assets
              
              $
              22,019,364
              
              $
              22,019,364
              
              $
              21,950,544
              
              $
              21,950,544
              
              $
              21,904,815
              
              $
              21,904,815
              
              $
              21,815,928
              
              $
              21,815,928Total
                  Liabilities
              
              $
              60,270
              
              $
              4,992,270
              
              $
              92,522
              
              $
              6,421,922
              
              $
              145,910
              
              $
              11,407,310
              
              $
              254,955
              
              $
              6,674,775Common
                  Stock Subject to Conversion
              
              $
              4,241,936
              
              $
              4,241,936
              
              $
              4,268,649
              
              $
              4,268,649
              
              $
              4,304,016
              
              $
              4,304,016
              
              $
              4,343,935
              
              $
              4,343,935Stockholders'
                  Equity
              
              $
              17,717,158
              
              $
              12,785,158
              
              $
              17,589,373
              
              $
              11,259,973
              
              $
              17,454,889
              
              $
              6,193,489
              
              $
              17,217,038
              
              $
              10,797,218





For
                  the Three Months Ended
                March
                  31, 2005
              
              For
                  the Three Months Ended
                June
                  30, 2005
              
              For
                  the Three Months Ended September 30, 2005
              
              For
                  the Three Months Ended December 31, 2005As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  Restated
              
              As
                  Previously Reported
              
              As
                  RestatedWarrant
                  liability Income (Expense)
              
              $
              —
              
              $
              411,000
              
              $
              —
              
              $
              (1,397,400
              )
              $
              —
              
              $
              (4,932,000
              )
              $
              —
              
              $
              4,841,580Net
                  Income (Loss)
              
              $
              (48,250
              )
              $
              362,750
              
              $
              (108,413
              )
              $
              (1,505,813
              )
              $
              (107,458
              )
              $
              (5,039,458
              )
              $
              (204,274
              )
              $
              (4,637,306
              )Net
                  Income (Loss) Per Share-Basic
              
              $
              (0.01
              )
              $
              0.10
              
              $
              (0.02
              )
              $
              (0.29
              )
              $
              (0.02
              )
              $
              (0.99
              )
              $
              (0.04
              )
              $
              0.91Net
                  Income (Loss) Per Share-Diluted
              
              $
              (0.01
              )
              $
              0.00
              
              $
              (0.02
              )
              $
              (0.29
              )
              $
              (0.02
              )
              $
              (0.99
              )
              $
              (0.04
              )
              $
              (0.02
              )






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For
                  the Six Months Ended
                June
                  30, 2005
              
              For
                  the Nine Months Ended
                September
                  30, 2005As
                  Previously
                Reported
              
              As
                  Restated
              
              As
                  Previously
                Reported
              
              As
                  RestatedWarrant
                  liability Income (Expense)
              
              $
              —
              
              $
              (986,400
              )
              $
              —
              
              $
              (5,918,400
              )Net
                  Income (Loss)
              
              $
              (156,663
              )
              $
              (1,143,063
              )
              $
              (263,121
              )
              $
              (6,181,521
              )Net
                  Income (Loss) Per Share-Basic
              
              $
              (0.03
              )
              $
              (0.22
              )
              $
              (0.05
              )
              $
              (1.21
              )Net
                  Income (Loss) Per Share-Diluted
              
              $
              (0.03
              )
              $
              (0.22
              )
              $
              (0.05
              )
              $
              (1.21
              )





Year
                  Ended December 31, 2004
              
              Year
                  Ended December 31, 2005As
                  Previously
                Reported
              
              As
                  Restated
              
              As
                  Previously
                Reported
              
              As
                  RestatedWarrant
                  liability (Expense)
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              (1,076,820
              )Net
                  Loss
              
              $
              (49,907
              )
              $
              (49,907
              )
              $
              (468,394
              )
              $
              (1,545,214
              )Net
                  Loss Per Share-Basic
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.09
              )
              $
              (0.30
              )Net
                  Income (Loss) PerShare-Diluted
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.09
              )
              $
              (0.30
              )




The
      Company, now that it has signed a merger agreement with St. Bernard Software,
      will submit this transaction for stockholder approval. In the event that
      stockholders owning 20% or more of the outstanding stock excluding, for this
      purpose, those persons who were stockholders immediately prior to the Offering,
      vote against the Business Combination, the Business Combination will not be
      consummated. All of the Company’s stockholders prior to the Offering, including
      all of the officers and directors of the Company (“Initial Stockholders”), have
      agreed to vote their founding shares of common stock in accordance with the
      vote
      of the majority in interest of all other stockholders of the Company (“Public
      Stockholders”) with respect to a Business Combination. After consummation of the
      Company’s first Business Combination, these voting safeguards no longer apply.




With
      respect to the first Business Combination which is approved and consummated,
      any
      Public Stockholder who voted against the Business Combination may demand that
      the Company redeem his or her shares. The per share redemption price will equal
      the amount in the Trust Fund as of the record date for determination of
      stockholders entitled to vote on the Business Combination divided by the number
      of shares of common stock held by Public Stockholders at the consummation of
      the
      Offering. Accordingly, Public Stockholders holding 19.99% of the aggregate
      number of shares owned by all Public Stockholders may seek redemption of their
      shares in the event of a Business Combination. Such Public Stockholders are
      entitled to receive their ‘per share’ interest in the Trust Fund computed
      without regard to the shares held by Initial Stockholders.




The
      Company’s Certificate of Incorporation provides for the mandatory liquidation of
      the Company, without stockholder approval, in the event that the Company does
      not consummate a Business Combination within 18 months from the date of the
      consummation of the Offering (January 30, 2006), or 24 months from the
      consummation of the Offering (July 30, 2006) if certain extension criteria
      have been satisfied. The Company met this first criterion by signing a
      definitive merger agreement with St. Bernard on October 26, 2005. In the event
      of liquidation, it is likely that the per share value of the residual assets
      remaining available for distribution (including Trust Fund assets) will be
      less
      than the initial public offering price per share in the Offering (assuming
      no
      value is attributed to the Warrants contained in the Units to be offered in
      the
      Offering as described in Note 3).




**2.** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




*Basis
      of Presentation*




The
      financial statements include the accounts of the Company. The Company commenced
      operations effective July 31, 2004. All activity through July 30, 2004, is
      related to the Company’s formation and preparation of the Offering.




Certain
      reclassifications have been made to prior period financial statements to conform
      with current period presentations.




*Use
      of Estimates*




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingencies at the date of the financial statements and the reported amounts
      of expenses during the reporting period. Actual amounts could differ from those
      estimates.




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*Cash
      Equivalents*




The
      Company considers all highly liquid investments with original maturities of
      three months or less to be cash equivalents.




*Concentration
      of Credit Risk*




Financial
      instruments that potentially subject the Company to credit risk consist of
      cash
      and cash equivalents. The Company’s policy is to limit the amount of credit
      exposure to any one financial institution and place investments with financial
      institutions evaluated as being creditworthy, or in short-term money market
      funds which are exposed to minimal interest rate and credit risk.




*Federal
      Income Taxes*




The
      Company recognizes deferred tax assets and liabilities for the expected future
      tax consequences of events that have been recognized in the Company’s financial
      statements or tax returns. Under this method, deferred tax assets and
      liabilities are determined based on the difference between the financial
      statement carrying amounts and the tax bases of assets and liabilities using
      enacted tax rates in effect in the years in which the differences are expected
      to reverse. At December 31, 2005, a deferred income tax asset of
      approximately $70,000 relating to the Company’s net operating loss is offset by
      a full valuation allowance based upon a lack of earnings history for the
      Company.




*Franchise
      Taxes*




The
      Company is subject to Delaware state franchise taxes which is computed under
      the
      Assumed Per Value Method for the year ended December 31, 2005. The Company
      had $103,733 of tax expense related to these taxes.




*Earnings
      per Common Share*




Basic
      earnings per share (“EPS”) is computed by dividing net income applicable to
      common stock by the weighted average common shares outstanding during the
      period. Diluted EPS reflects the additional dilution for all potentially
      dilutive securities such as stock warrants.




*Recently
      Issued Accounting Standards*




On
      December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) will require companies to measure
      all employee stock-based compensation awards using a fair value method and
      record such expense in its financial statements. In addition, the adoption
      of
      SFAS No. 123(R) requires additional accounting and disclosure related to the
      income tax and cash flow effects resulting from share-based payment
      arrangements. SFAS No. 123(R) is effective beginning January 1, 2006. The
      Company does not expect the impact of applying this guidance to be material
      to
      its financial statements.




**3.** **PUBLIC
      OFFERING**




On
      July 30, 2004, the Company sold 3,600,000 units (“Units”) in a public
      offering, which included granting the underwriters’ an over-allotment option to
      purchase up to an additional 540,000 Units. Subsequently, the underwriters
      exercised their over-allotment option and purchased an additional 510,000
      shares. Each Unit consists of one share of the Company’s common stock, $0.01 par
      value, and two Redeemable common stock Purchase Warrants (“Warrants”). Each
      Warrant will entitle the holder to purchase from the Company one share of common
      stock at an exercise price of $5.00 commencing on the later of the completion
      of
      a Business Combination or July 25, 2005 and expiring July 25, 2009. The Warrants
      will be redeemable by the Company at a price of $0.01 per Warrant upon 30 days’
notice after the Warrants become exercisable, only in the event that the last
      sale price of the common stock is at least $8.50 per share for any 20 trading
      days within a 30 trading day period ending on the third day prior to the date
      on
      which notice of the redemption is given. In connection with the Offering, the
      Company issued an option for $100 to the underwriters’ to purchase 270,000 Units
      at an exercise price of $7.50 per Unit. The Units issuable upon exercise of
      this
      option are identical to those included in the Offering except that exercise
      price of the Warrants included in the Units will be $6.65 per
      share.




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The
      sale
      of the option has been accounted for as an equity transaction in accordance
      with
      Emerging Issues Task Force No. 00-19, Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in a Company’s Own Stock, and
      therefore has been measured at its fair value on the date of the sale in
      accordance with Statements of Financial Accounting Standards No. 123 (revised
      2004), Share-based Payment, which resulted in an increase in the Company’s cash
      position and shareholders’ equity by the $100 proceeds from the sale. The
      Company has determined based upon a trinomial model, that the estimated fair
      value of the option on the date of sale would be approximately $.658 per unit
      or
      an aggregate of $177,660 , assuming an expected life of four years, volatility
      of 11.58% and a risk-free interest rate of 4.393%. Given the parameters used
      in
      the computation of the fair value of the option change over time, the actual
      fair value of the option on the date of sale is expected to be different from
      the estimated fair value computed above.




The
      volatility calculation of 11.58% is based on the latest 90 days average
      volatility of the Standard and Poor’s IT sector (“Index”). Due to the fact the
      Company does not have a trading history, the Company referred to the latest
      90
      days average volatility of the Index because management believes that the
      average volatility of such index is a reasonable benchmark to use in estimating
      the expected volatility of the Company’s common stock after consummation of a
      business combination. Although an expected life of four years was taken into
      account for purposes of assigning a fair value to this option, if the Company
      does not consummate a Business Combination within the prescribed time period
      and
      liquidates, this option would become worthless. Pursuant to Rule 2710(g)(1)
      of
      the NASD Conduct Rule, the option to purchase 270,000 units is deemed to be
      underwriting compensation and therefore upon exercise, the underlying shares
      and
      warrants are subject to a 180-day lock-up.




**4.** **COMMITMENT**




The
      Company presently occupies office space provided by an Initial Stockholder.
      Such
      affiliate has agreed that, until the acquisition of a target business by the
      Company, it will make such office space, as well as certain office and
      secretarial services, available to the Company, as may be required by the
      Company from time to time. The Company has agreed to pay such affiliate $7,500
      per month for such services commencing on July 31, 2004.




**5.** **NOTE
      PAYABLE**




Sand
      Hill
      Security, LLC, an Initial Stockholder and affiliate of the officers and
      directors of the Company, entered into a revolving credit agreement with the
      Company in the amount of $60,000. Advances under the credit facility amounted
      to
      $40,000 as of July 30, 2004. The loan was repaid out of the net proceeds of
      the
      Offering.




**6.** **PREFERRED
      STOCK**




The
      Company is authorized to issue 5,000,000 shares of preferred stock, par value
      $.01, with such designations, voting and other rights and preferences as may
      be
      determined from time to time by the Board of Directors as of December 31, 2005,
      no shares of preferred stock have been issued.




**7.** **INVESTMENTS
      HELD IN TRUST**




Investments
      held in trust as of December 31, 2005 is comprised of a zero coupon United
      States treasury bill with a face value of $21,730,543 purchased at a discount
      of
      99.53% due April 20, 2006.




**8.** **EARNINGS
      PER SHARE**




The
      following table sets forth the computation of basic and diluted earnings per
      share for the year ended December 31, 2005 and for the period from April 15,
      2004 (inception) to December 31, 2004.




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BASIC:
            
            2005
            
            2004Numerator:
                Net loss
            
            $
            (1,545,214
            )
            $
            (49,907
            )Denominator:
                Average common shares outstanding
            
            
            5,110,000
            
            
            3,468,784Basic
                earnings per share
            
            $
            (0.30
            )
            $
            (0.01
            )DILUTED:Numerator:
                Net loss
            
            $
            (1,545,214
            )
            $
            (49,907
            )Denominator:
                Average common shares outstanding
            
            
            5,110,000
            
            
            3,468,784Diluted
                earnings per share
            
            $
            (0.30
            )
            $
            (0.01
            )




Operations
      commenced subsequent to the Offering, therefore, average common shares
      outstanding reflect shares issued in the Offering. No computation for diluted
      earnings per share was reflected in the above table for the common stock
      Purchase Warrants and the underwriters’ option to purchase an aggregate of
      8,820,000 shares of common stock at $5.00 per share and $6.65 per share,
      respectively, because the inclusion of such warrants would be
      anti-dilutive.




**9.** **STOCK
      OPTION PLAN**




On
      December 1, 2004, the Board of Directors of the Company created an Advisory
      Board, consisting of four independent members to advise the Company with respect
      to the research and structuring of a business combination with an operating
      business in the IT security industry. The Board of Directors authorized the
      Company to reserve 100,000 shares of common stock for issuance pursuant to
      the
      exercise of stock options to purchase shares of commons stock at an exercise
      price of $4.75 per share, to be granted to the initial members of the Advisory
      Board. Pursuant to the terms of the stock option agreement, the options will
      vest (i) 50% one year from the grant of the option and (ii) 50% two years from
      the grant of the option; however, the options will not be exercisable prior
      to
      the consummation of a business combination by the Company.




The
      fair
      value of these options was estimated at the date of grant using a Black-Scholes
      option pricing (“Black-Scholes”) model with the following weighted average
      assumptions for 2005: (i) risk-free interest rate of 4.76%, (ii) a dividend
      yield of 0.00%, (iii) volatility factors of the historical market price of
      the
      Company’s common stock of 12.97% and (iv) a weighted average expected life of 4
      years.




The
      Black-Scholes model was developed for use in estimating the fair value of traded
      options that have no vesting restrictions and are fully transferable. In
      addition, option valuation models require the input of highly subjective
      assumptions, including the expected volatility. Because the Company’s stock
      options have characteristics significantly different from those of traded
      options and because changes in the subjective input assumptions can materially
      affect the fair value estimate, in management’s opinion, the existing models do
      not necessarily provide a reliable single measure of the fair value of its
      stock
      options. The estimated fair value of the options is amortized to expense over
      the vesting period of the stock options, which is two years.




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**A
      summary of the activity of the Company’s fixed stock option plans is presented
      below:**




**Shares**
            
            **Weighted
                Average Exercise Prices**
            
            **Fair
                Value**Stock
                options outstanding at April 15, 2004
            
            
            -
            
            $
            -
            
            $
            -Options
                granted
            
            
            60,000
            
            
            4.75
            
            
            0.98Options
                cancelled
            
            
            -
            
            
            -
            
            
            -Stock
                options outstanding at December 31, 2004
            
            
            60,000
            
            $
            4.75
            
            
            0.98Options
                granted
            
            
            -
            
            
            -Options
                cancelled
            
            
            -
            
            
            -Stock
                options outstanding at December 31, 2005
            
            
            60,000
            
            $
            4.75Common
                shares authorized under the 2004 Stock Plan
            
            
            100,000Outstanding
                options
            
            
            (60,000
            )Outstanding
                stock grants
            
            
            -Options
                available for grant at December 31, 2004
            
            
            40,000Shares
                exercisable at December 31, 2005
            
            
            60,000
            
            $
            4.75
            
            $
            0.98Outstanding
                option
            
            
            (60,000
            )
            
            -Outstanding
                stock grants
            
            
            -
            
            
            -Options
                available for grant at December 31, 2005
            
            
            40,000
            
            $
            4.75


The
      weighted average remaining contractual life of options is 4 years.




**10.** **MANAGEMENT
      PLANS**




The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. As shown in the accompanying financial
      statements, the Company had current liabilities of $6,674,775 as of December
      31,
      2005 and net loss of $1,545,214 for the year ended December 31, 2005. The
      Company does not have any more due diligence funds to satisfy its current
      obligations. This matter raises doubt about the Company’s ability to continue as
      a going concern without additional infusions of equity capital or
      debt.




The
      financial statements do not include any adjustments should the Company be unable
      to continue as a going concern. On October 26, 2005, the Company entered into
      a
      definitive Agreement and Plan of Merger with St. Bernard Software, Inc. which
      management believes will provide the necessary funds in 2006 to satisfy its
      immediate obligations. In the event that the merger is not consummated in 2006,
      the Company will be required to liquidate. The Company believes that it will
      be
      successful in removing the uncertainty concerning its ability to continue as
      a
      going concern by consummating the merger with St. Bernard Software, Inc. in
      2006.




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**Item
      8. Changes In and Disagreements With Accountants or
      Accounting and Financial Disclosure**




None.




**Item
      8A.Controls and Procedures**




Under
      the
      supervision and with the participation of our management, including our chief
      executive officer and chief financial officer, we have evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of December 31, 2005 (the “Evaluation Date”), and, based on their
      evaluation, our chief executive officer and chief financial officer have
      concluded that these controls and procedures were effective as of the Evaluation
      Date. However, in connection with the preparation of Amendment No. 4 to the
      Registration Statement on Form S-4 related to the Agreement and Plan of Merger,
      dated as of October 26, 2005, by and among our company, St. Bernard Software,
      Inc. and Sand Hill Merger Corp., we were advised by our independent registered
      accounting firm, Hein & Associates LLP (“Hein”) on June 19, 2006, that we
      may need to reclassify certain amounts in our financial statements to report
      the
      warrants issued as part of the units in our initial public offering as a
      liability. Hein based its conclusions upon on a comment received from the
      Securities and Exchange Commission in connection with the preparation of the
      Amendment No. 4 to the Registration Statement on Form S-4 and after further
      discussion with the Staff of the Securities and Exchange Commission. We
      addressed this concern by determining to restate our Form 10-KSB for the fiscal
      year ended December 31, 2005 and our Form 10-QSB/A for the period ended March
      31, 2006 to reflect this reclassification. There were no significant changes
      in
      our internal controls or in other factors that could significantly affect these
      controls subsequent to the Evaluation Date.




**PART
      III**




**Item
      9. Directors, Executive Officers, Promoters and
      Control Persons**




Our
      current directors and executive officers are as follows:




Name
            
            Age
            
            PositionHumphrey
                P. Polanen
            
            56
            
            Chief
                Executive Officer and Chairman of the Board of
                DirectorsKeith
                Walz
            
            38
            
            President,
                Chief Financial Officer and DirectorScott
                Broomfield
            
            49
            
            Executive
                Vice President of Corporate Development and DirectorCary
                M. Grossman
            
            52
            
            DirectorDaniel
                Johnson, Jr.
            
            57
            
            DirectorAlberto
                Micalizzi
            
            37
            
            Director




**HUMPHREY
      P. POLANEN** has been
      our chairman of the board and chief executive officer since our inception.
      He
      has had a career as an entrepreneur in technology, a global executive for
      leading technology companies and as an international corporate lawyer. From
      January 2004 until March 2004 Mr. Polanen worked on preparations for Sand
      Hill’s initial public offering. From January 2000 until December 2003, Mr.
      Polanen served as Managing Director of Internet Venture Partners, a strategic
      consulting and venture capital management firm for technology companies. From
      February 1998 through February 1999, he was president and CEO of Trustworks
      Systems, a network security software company. Between 1995 and 1998 he was
      general manager of two divisions of Sun Microsystems where he led the Internet
      Commerce Group and the Network Security Division. From 1981 to 1995, he was
      with
      Tandem Computers (acquired by Compaq/Hewlett-Packard), where he held several
      executive positions and was director of worldwide business development and
      a
      director of several subsidiaries. Mr. Polanen has been a member of the board
      of
      directors of Heritage Bank of Commerce since the bank’s inception and has been
      chair of the board’s audit committee for ten years. Mr. Polanen is a
      graduate of Hamilton College and the Harvard Law School.




**KEITH
      WALZ** has been
      our chief financial officer since January 10, 2005 and a member of our
      board since inception. Mr. Walz is President of ABN AMRO Capital (USA) and
      a
      Managing Director in ABN AMRO’s Global Private Equity division. Mr. Walz joined
      ABN AMRO Capital (USA) at inception in 1996. As a Senior Partner, Mr. Walz
      participated in the sourcing, evaluation, and monitoring of over 35 investments,
      representing $200 million of capital invested. Mr. Walz focused on Enterprise
      Software and Network Infrastructure investments. Mr. Walz has served on the
      board of directors of over a dozen companies in which ABN AMRO has invested.
      Also, he has held operating roles with ABN AMRO portfolio companies, including
      Chairman and CEO of Worldweb.net and was a member of the Argus Systems, board
      of
      directors, a developer of Trusted Computer Operating Systems. Prior to joining
      ABN AMRO Capital, Mr. Walz was a vice president in ABN AMRO’s Investment Banking
      division, responsible for financial reporting, analysis, and systems. Prior
      to
      joining ABN AMRO he spent two years as a finance associate with Tyson Foods,
      Inc., where he focused on enhancing enterprise business processes and systems
      through the use of client/server computing technologies. Mr. Walz is also a
      director of GT Nexus, Yellowbrix, and Oasis Technology. He received an M.B.A.
      from DePaul University and a B.S. in Finance from the University of Arkansas.




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**SCOTT
      BROOMFIELD** has been
      a member of the board of directors of Sand Hill IT Security Acquisition Corp.
      and EVP of Corporate Development since April 2004, and has worked full time
      with
      Sand Hill since August 2005. Until recently, Mr. Broomfield was the CEO of
      Xtegra Corporation, a private software company specializing in enterprise
      information integration, EII, which he sold to SAP AG (NYSE: SAP) in August
      2005. Previously, Mr. Broomfield had been the CEO of Visuale, a private business
      process software company that he sold to Onyx Software Corporation (NASDAQ:
      ONXS) in April 2004. Prior to joining Visuale and from 1997 until 2001, Mr.
      Broomfield was the CEO of Centura Software Corporation (formerly Gupta
      Technologies, a NASDAQ traded company), a $50 million software business
      specializing in secure, embedded and mobile databases and application
      development tools. During his tenure as CEO of Centura, Mr. Broomfield completed
      the acquisition of Raima Corporation and in three years built its market
      capitalization from $6 million to $700 million by early 2000. He eventually
      sold
      the assets of Centura to Platinum Equity Holdings and Birdstep Corporation.
      Prior to Centura, he was a Managing Director of Hickey & Hill, Inc., a
      turnaround consultancy. At Hickey & Hill he was in charge of the high
      technology restructuring practice. Mr. Broomfield structured the acquisition
      of
      Polyscan and the equity recapitalization for ETEC Corporation. He was also
      instrumental in the following company divestitures: Dazix, Domain Technologies,
      Priam, Everex and Zitel, where he acquired 2 businesses to reposition Zitel
      in
      the market. Prior to Hickey & Hill, Mr. Broomfield was the CFO of Trilogy
      Technology Corporation which was sold to Digital Equipment Corporation. Mr.
      Broomfield holds an MBA from Santa Clara University and is a member of Business
      Executives for National Security (BENS), where he was the co-chair of BENS’
cyber security task force and Y2K initiatives.




**CARY
      M. GROSSMAN** has been
      a member of our board since inception and served as our chief financial officer
      from inception through January 10, 2005. Since May 19, 2004, Mr.
      Grossman has been the Chairman and Co-Chief executive officer of Coastal
      Bancshares Acquisition Corp. (OTCBB: CBAS), a blank check company formed to
      acquire or merge with a commercial bank or bank holding company. Mr. Grossman
      has been Executive Vice president and chief financial officer of Gentium, S.p.A,
      an Italian biopharmaceutical company, since August 2004. He is also a director
      of I-Sector Corp., an internet telephony company, since December 2004. From
      2002
      until 2003 he served as executive vice president and chief financial officer
      at
      U S Liquids, Inc, an AMEX listed environmental services company. Mr. Grossman
      left U S Liquids, Inc. in 2003 as a result of the acquisition of three of its
      businesses by a private equity firm and was president and chief executive
      officer of the acquiring company, ERP Environmental Services until November
      2003. From 1997 until 2002, Mr. Grossman served Pentacon, Inc. (NSYE: JIT),
      a
      provider of inventory management services and distributor of components to
      Fortune 50 original equipment manufacturers, as a board member and in several
      senior executive positions including: chairman of the board of directors, acting
      chief financial officer (2001-2002) and Lead Director (1998-2001) from the
      time
      the Pentacon went public in March 1998 until becoming Chairman in 2001. Pentacon
      acquired five businesses when it completed its initial public offering and
      subsequently acquired four other businesses. Pentacon and substantially all
      of
      its subsidiaries filed a Joint Chapter 11 Plan of Debtors in 2002. From 1991
      until 2002, Mr. Grossman was the managing partner of McFarland, Grossman &
Company, Inc., an investment banking and financial advisory firm he co-founded
      in 1991. Prior to that, Mr. Grossman practiced public accounting for 15 years.
      He earned a bachelor of business administration in accounting from The
      University of Texas, and is a certified public accountant.




**DANIEL
      JOHNSON, JR.** has
      been
      a member of our board since inception and is a senior partner in the Silicon
      Valley law firm Morgan Lewis, where he specializes in patent litigation and
      other complex intellectual property cases. From 1998 thru March 2005, he was
      a
      senior partner in the Silicon Valley law firm Fenwick
      & West. He
      has
      acted as lead trial counsel in numerous technology cases involving, among other
      things, Internet software, firmware, non-volatile memory, printed circuit board
      design, digital cellular technology and lasers. Mr. Johnson has also advised
      client companies on acquisition matters, including Netscreen in its acquisition
      by Juniper Networks. Mr. Johnson is recognized as an outstanding trial lawyer
      by
      numerous national and international associations and publications. He is a
      co-author of the Rules of Civil Procedure in Patent Cases for the Northern
      District of California, has participated in numerous panels on trial advocacy
      and has presented on the use of multi-media at trial on behalf of the American
      Bar Association. Mr. Johnson is a graduate of Yale University Law School, J.D.,
      and of the University of California, Berkeley, A.B., in political science,
      with
      honors.




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**ALBERTO
      MICALIZZI** has
      been
      a member of our board since inception. Dr Micalizzi is the chairman of Dynamic
      Decisions Group Ltd, an independent quantitative research house providing
      advisory activity to large institutional investors in the fields of equity
      research and asset management. Mr. Micalizzi joined Dynamic Decision Group
      Ltd
      in September 2001. He is Professor of Finance at Bocconi University, Milan
      (Italy), and Researcher at the Centre for Quantitative Finance, Imperial
      College, London University (UK), where he specializes in the Bio-Pharma and
      Telecom-Technology sector sectors. Until July 2001, he was the CEO of the Real
      Options Group, an international research center affiliated to several US and
      European universities and business schools. From December 1998 to March 2000,
      Mr. Micalizzi worked with an association of researchers that developed into
      the
      Real Ophons Group. In 1997 he was appointed by Nomura International (Milan)
      as
      an external advisor for the designing of structured products in the bond market.
      In 1999 he was appointed by Andersen Consulting (London) as an advisor on the
      valuation of start up businesses in the e-venture segment. Other advisory
      experiences include Eli Lilly, Schering Plough, Glaxo, La Roche, Danone Group
      and Ernst & Young. Dr. Micalizzi earned a degree in Business Administration
      at Bocconi University (Milan, Italy), is a Chartered Professional Accountant
      (CPA) and received his Ph.D in finance at Imperial College, London University
      (UK).




The
      Company is not aware of any “family relationships” among directors, executive
      officers, or persons nominated or chosen by the Company to become directors
      or
      executive officers.




The
      Company is not aware of any event (as listed in Item 401(d) of Regulation S-B
      promulgated by the Securities and Exchange Commission) that occurred during
      the
      past five years that are material to an evaluation of the ability or integrity
      of any director, person nominated to become a director, executive officer,
      promoter or control person of the Company.




*Section
      16(a) Beneficial Ownership Reporting Compliance*




Section
      16(a) of the Exchange Act requires the Company’s officers and directors, and
      persons who own more than 10% of a registered class of the Company’s equity
      securities (the “10% Stockholders”) to file reports of ownership and changes of
      ownership with the Securities and Exchange Commission (“SEC”). Officers,
      directors and 10% Stockholders of the Company are required by SEC regulations
      to
      furnish the Company with copies of all Section 16(a) forms so filed. Based
      solely on correspondence with, and a review of copies of Section 16(a) forms
      received from executive officers and directors and 10% Stockholders (if any),
      the Company does not believe that, during the last fiscal year any of the
      Reporting Persons was deficient in filing reports of ownership or changes in
      ownership with the SEC.




*Audit
      Committee*




We
      do not
      have a standing audit committee or an audit committee financial expert serving
      on our board of directors. As our plan of operations involves identifying a
      target business and completing a business combination with such business, we
      presently do not have material operations and do not experience complex
      accounting issues. Accordingly, our board of directors has determined that
      it is
      not necessary for us to have a standing audit committee or an audit committee
      financial expert at this time.




*Code
      of Ethics*




In
      August
      2004, our board of directors adopted a code of business conduct and ethics
      that
      applies to our directors, officers and employees as well as those of our
      subsidiaries. A copy of our code of ethics has been filed as an exhibit to
      our
      Quarterly Report on Form 10-Q for the period ending July 30, 2004, and is
      available on our website at www.sandhillsecurity.com.




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**Item
      10. Executive Compensation**




No
      executive officer has received any cash compensation for services rendered.
      Commencing on July 31, 2004 through the acquisition of a target business, we
      will pay Sand Hill Security, LLC, an affiliate of our directors and executive
      officers, a fee of $7,500 per month for providing us with office space and
      certain office and secretarial services. Other than this $7,500 per-month fee,
      no compensation of any kind, including finder’s and consulting fees, will be
      paid to any of our initial stockholders, or any of their respective affiliates
      for services rendered to us prior to or with respect to a business combination.
      However, our initial stockholders will be reimbursed for any out-of-pocket
      expenses incurred in connection with activities on our behalf such as
      identifying potential target businesses and performing due diligence on suitable
      business combinations. There is no limit on the amount of these out-of-pocket
      expenses and there will be no review of the reasonableness of the expenses
      by
      anyone other than our board of directors, which includes persons who may seek
      reimbursement, or a court of competent jurisdiction if such reimbursement is
      challenged.




**Item
      11. Security Ownership of Certain Beneficial Owners
      and Management**




The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock as of February 1, 2005 by:




·
            each
                person known by us to be the beneficial owner of more than 5% of
                our
                outstanding shares of common stock;




·
            each
                of our officers and directors; and




·
            all
                our officers and directors as a
                group.




Unless
      otherwise indicated, we believe that all persons named in the table have sole
      voting and investment power with respect to all shares of common stock
      beneficially owned by them.




**Name
              and Address of Beneficial****Owner(1)**
            
            **Amount
                and Nature of**
              **Beneficial
                Ownership**
            
            **Approximate
                Percentage of**
              **Outstanding
                Common Stock**Humphrey
                Polanen(2)
            
            
            459,441
            
            
            9.0
            %Sand
                Hill Security, LLC(3)
            
            
            100,000
            
            
            2.0
            %Keith
                Walz
            
            
            174,825
            
            
            3.4
            %Scott
                Broomfield(4)
            
            
            174,825
            
            
            3.4
            %Cary
                Grossman(5)
            
            
            48,951
            
            
            1.0
            %Dan
                Johnson(6)
            
            
            20,979
            
            
            *Alberto
                Micalizzi(7)
            
            
            20,979
            
            
            *Sapling,
                LLC(8)
            
            
            400,000
            
            
            7.8
            %Amaranth,
                LLC(9)
            
            
            299,098
            
            
            5.9
            %Roger
                Feldman and Harvey Hanerfeld(10)
            
            
            385,600
            
            
            7.5
            %All
                directors and executive officers as a group (6
                individuals)
            
            
            1,000,000
            
            
            19.6
            %





*
            less
                than 1%.


(1)
            Unless
                otherwise indicated, the business address of each of the following
                is 3000
                Sand Hill Road, Building 1, Suite 240, Menlo Park, California
                94025.


(2)
            Does
                not include 108,500 shares of common stock issuable upon exercise
                of
                warrants that are not currently
                exercisable.


(3)
            Sand
                Hill Security, LLC Membership Interests are held by (i) the Polanen
                and
                Nicodimos Family Trust, of which Mr. Polanen is a trustee, (ii) the
                Broomfield Family Trust, of which Mr. Broomfield is a trustee, (iii)
                Dan
                Johnson, (iv) Keith Walz, (v) Alberto Micalizzi, and (vi) the Grossman
                Family Limited Partnership, of which Mr. Grossman is a general
                partner.


(4)
            Mr.
                Broomfield’s shares are held by the Broomfield Family Trust, of which Mr.
                Broomfield is a Co-Trustee. Does not include 105,000 shares of common
                stock issuable upon exercise of warrants that are not currently
                exercisable.


(5)
            Mr.
                Grossman’s shares are held by Grossman Family Limited Partnership, of
                which Mr. Grossman is a general partner. Does not include 8,000 shares
                of
                common stock issuable upon exercise of warrants that are not currently
                exercisable.


(6)
            Does
                not include 75,000 shares of common stock issuable upon exercise
                of
                warrants that are not currently
                exercisable.


(7)
            Mr.
                Micalizzi’s business address is Corso Italia 66, 20136 Milan,
                Italy.


(8)
            Represents
                shares beneficially owned by Sapling, LLC. FirTree Master Fund, LP,
                is the
                sole member of Sapling, LLC, and Fir Tree, Inc. is the manager of
                Sapling,
                LLC. The business address is 535 Fifth Ave., 31stfloor, New York, New York 10003.


(9)
            Represents
                shares beneficially owned by Amaranth, LLC, Amaranth Advisors L.L.C.
                and
                Nicholas M. Maounis. The business address is One American Lane, Greenwich,
                Connecticut 06831.


(10)
            Represents
                shares of common stock held by West Creek Partners Fund, L.P., certain
                private accounts and Cumberland Investment Partners, L.L.C. Messrs.
                Feldman and Hanerfeld are the sole stockholders, directors and executive
                officers of West Creek Capital, Inc., a Delaware corporation that
                is the
                general partner of West Creek Capital, L.P., a Delaware limited
                partnership that is the investment adviser to (i) West Creek Partners
                Fund
                L.P., a Delaware limited partnership (the “Fund”) and (ii) certain private
                accounts (the “Accounts”), Messrs. Feldman and Hanerfeld may be deemed to
                have the shared power to direct the voting and disposition of the
                232,000
                shares of common stock owned by the Fund and the 22,100 shares of
                common
                stock held in the Accounts. As voting members of Cumberland Investment
                Partners, L.L.C., a Delaware limited liability company (“Cumberland”),
                Messrs. Feldman and Hanerfeld may be deemed to have the shared power
                to
                direct the voting and disposition of the 131,500 shares of common
                stock
                owned by Cumberland. Neither of Messrs. Feldman or Hanerfeld has
                sole
                power to direct the voting and disposition of any of the shares of
                common
                stock beneficially owned by them. The business address for Messrs.
                Feldman
                and Hanerfeld is 1919 Pennsylvania Avenue, NW, Suite 725, Washington,
                DC
                20006.






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All
      of
      the shares of our common stock owned by the initial stockholders have been
      placed in escrow with American Stock Transfer & Trust Company, as escrow
      agent, until the earliest of:




·
            July
                30, 2007;




·
            our
                liquidation; or




·
            the
                consummation of a liquidation, merger, stock exchange or other similar
                transaction that results in all of our stockholders having the right
                to
                exchange their shares of common stock for cash, securities or other
                property subsequent to our consummating a business combination with
                a
                target business.




During
      the escrow period, the holders of these shares will not be able to sell or
      transfer their securities except to their spouses and children, trusts or family
      partnerships established for their benefit, or to a transferee that does not
      affect beneficial ownership but will retain all other rights as our
      stockholders, including, without limitation, the right to vote their shares
      of
      common stock and the right to receive cash dividends, if declared. If dividends
      are declared and payable in shares of common stock, such dividends will also
      be
      placed in escrow. If we are unable to effect a business combination and
      liquidate, none of our initial stockholders will receive any portion of the
      liquidation proceeds with respect to common stock owned by them prior to the
      Offering.




Mr.
      Polanen may be deemed to be our “parent” and “promoter,” as these terms are
      defined under the federal securities law.




**Item
      12. Certain Relationships and Related Transactions**




Prior
      to
      the Offering, we issued 1,000,000 shares of our common stock to the individuals
      set forth below for $25,000 in cash, at an average purchase price of
      approximately $0.025 per share, as follows:




**Name**
            
            **Number of Shares**
            
            **Relationship
                To Us**Humphrey
                Polanen
            
            459,441
            
            Chief
                Executive Officer and Chairman of the Board of
                DirectorsSand
                Hill Security, LLC
            
            100,000
            
            Affiliate
                of our directors and executive officersKeith
                Walz
            
            174,825
            
            President,
                Chief Financial Officer and DirectorScott
                Broomfield
            
            174,825
            
            Executive
                Vice President of Corporate Development and DirectorCary
                Grossman
            
            48,951
            
            DirectorDan
                Johnson
            
            20,979
            
            DirectorAlberto
                Micalizzi
            
            20,979
            
            Director






The
      holders of the majority of these shares are entitled to make up to two demands
      that we register these shares pursuant to an agreement executed in connection
      with the Offering. The holders of the majority of these shares may elect to
      exercise these registration rights at any time after the date on which these
      shares of common stock are released from escrow. In addition, these stockholders
      have certain “piggy-back” registration rights on registration statements filed
      subsequent to the date on which these shares of common stock are released from
      escrow. We will bear the expenses incurred in connection with the filing of
      any
      such registration statements.




Sand
      Hill
      Security, LLC, an affiliate of certain of our directors and executive officers,
      has agreed that, commencing July 31, 2004 through the acquisition of a target
      business, it will make available to us a small amount of office space and
      certain office and secretarial services, as we may require from time to time.
      We
      have agreed to pay Sand Hill Security, LLC $7,500 per month for these services. In
      addition, in April 2004, Sand Hill Security, LLC advanced an aggregate of
      $40,000 to us, on a non-interest bearing basis, for payment of offering expenses
      on our behalf. This amount was repaid in August 2004 out of the proceeds of
      the
      Offering.




We
      will
      reimburse our officers and directors for any reasonable out-of-pocket business
      expenses incurred by them in connection with certain activities on our behalf
      such as identifying and investigating possible target businesses and business
      combinations. There is no limit on the amount of accountable out-of-pocket
      expenses reimbursable by us, which will be reviewed only by our board or a
      court
      of competent jurisdiction if such reimbursement is challenged.




Other
      than the $7,500 per month administrative fee and reimbursable out-of-pocket
      expenses payable to our officers and directors, no compensation or fees of
      any
      kind, including finders and consulting fees, will be paid to any of our initial
      stockholders, officers or directors who owned our common stock prior to the
      Offering, or to any of their respective affiliates for services rendered to
      us
      prior to or with respect to the business combination.




All
      ongoing and future transactions between us and any of our officers and directors
      or their respective affiliates will be on terms believed by us to be no less
      favorable than are available from unaffiliated third parties and will require
      prior approval in each instance by a majority of the members of our board who
      do
      not have an interest in the transaction. **




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(a)
            The
                following exhibits are filed as part of report
                K:




**Exhibit
                No.**
            
            **Description**3.1
            
            Certificate
                of Incorporation (incorporated by reference to Exhibit 3.1 of the
                Company’s Registration Statement on Form S-1, registration
                no. 333-114861, filed with the Securities and Exchange
                Commission).3.2
            
            By-laws
                (incorporated by reference to Exhibit 3.2 of the Company’s
                Registration Statement on Form S-1, registration no. 333-114861,
                filed with the Securities and Exchange Commission).4.1
            
            Specimen
                Unit Certificate (incorporated by reference to Exhibit 4.1 of the
                Company’s Registration Statement on Form S-1, registration
                no. 333-114861, filed with the Securities and Exchange
                Commission).4.2
            
            Specimen
                Common Stock Certificate (incorporated by reference to Exhibit 4.2 of
                the Company’s Registration Statement on Form S-1, registration
                no. 333-114861, filed with the Securities and Exchange
                Commission).4.3
            
            Specimen
                Warrant Certificate (incorporated by reference to Exhibit 4.3 of the
                Company’s Registration Statement on Form S-1, registration
                no. 333-114861, filed with the Securities and Exchange
                Commission).4.4.1
            
            Unit
                Purchase Option No. UPO-2 dated July 30, 2004, granted to Newbridge
                Securities Corporation (filed as Exhibit 4.4.1 to the Company’s annual
                report on Form 10-KSB for the fiscal year ended 2004 (the “2004 10-K”) and
                incorporated herein by reference).4.4.2
            
            Unit
                Purchase Option No. UPO-3 dated July 30, 2004, granted to James E.
                Hosch
                (filed as Exhibit 4.4.2 to the 2004 10-K and incorporated herein
                by
                reference).4.4.3
            
            Unit
                Purchase Option No. UPO-4 dated July 30, 2004, granted to Maxim Group,
                LLC
                (filed as Exhibit 4.4.3 to the 2004 10-K and incorporated herein
                by
                reference).4.4.4
            
            Unit
                Purchase Option No. UPO-5 dated July 30, 2004, granted to Broadband
                Capital Management, LLC (filed as Exhibit 4.4.4 to the 2004 10-K
                and
                incorporated herein by reference).4.4.5
            
            Unit
                Purchase Option No. UPO-6 dated July 30, 2004, granted to I-Bankers
                Securities Incorporated (filed as Exhibit 4.4.5 to the 2004 10-K
                and
                incorporated herein by reference).4.5
            
            Warrant
                Agreement between American Stock Transfer & Trust Company and the
                Registrant (filed as Exhibit 4.5 to the 2004 10-K and incorporated
                herein
                by reference).10.1
            
            Letter
                Agreement among the Registrant, Newbridge Securities and I-Bankers
                Securities Incorporated and Humphrey P. Polanen (filed as Exhibit
                10.1 to the 2004 10-K and incorporated herein by
                reference).10.2
            
            Letter
                Agreement among the Registrant, Newbridge Securities and I-Bankers
                Securities Incorporated and Cary M. Grossman (filed as Exhibit 10.2
                to the 2004 10-K and incorporated herein by reference).10.3
            
            Letter
                Agreement among the Registrant, Newbridge Securities and I-Bankers
                Securities Incorporated and Daniel J. Johnson (filed as Exhibit 10.3
                to the 2004 10-K and incorporated herein by reference).10.4
            
            Letter
                Agreement among the Registrant, Newbridge Securities and I-Bankers
                Securities Incorporated and Keith A. Walz (filed as Exhibit 10.4 to
                the 2004 10-K and incorporated herein by reference).10.5
            
            Letter
                Agreement among the Registrant, Newbridge Securities and I-Bankers
                Securities Incorporated and Scott Broomfield (filed as Exhibit 10.5
                to the
                2004 10-K and incorporated herein by reference).10.6
            
            Letter
                Agreement among the Registrant, Newbridge Securities and I-Bankers
                Securities Incorporated and Alberto Micalizzi (filed as Exhibit 10.6
                to
                the 2004 10-K and incorporated herein by reference).10.8
            
            Investment
                Management Trust Agreement between American Stock Transfer & Trust
                Company and the Registrant (filed as Exhibit 10.8 to the 2004 10-K
                and
                incorporated herein by reference).10.9
            
            Stock
                Escrow Agreement between the Registrant, American Stock Transfer
&
                Trust Company and the Initial Stockholders (filed as Exhibit 10.9
                to the
                2004 10-K and incorporated herein by reference).10.10
            
            Registration
                Rights Agreement among the Registrant and the Initial Stockholders
                (filed
                as Exhibit 10.10 to the 2004 10-K and incorporated herein by
                reference).10.11
            
            Letter
                Agreement between Sand Hill Security, LLC and Registrant regarding
                administrative support (filed as Exhibit 10.11 to the 2004 10-K and
                incorporated herein by reference).10.12
            
            Revolving
                Credit Agreement in the principle amount of $60,000 between the Registrant
                and Sand Hill Security, LLC (filed as Exhibit 10.12 to the 2004 10-K
                and incorporated herein by reference).10.13
            
            M&A
                Advisory Services Agreement, dated effective as of March 30, 2005,
                by and
                between the Company and Software Equity Group, L.L.C. (filed as Exhibit
                10.2 to the Company’s quarterly report on Form 10-QSB for the quarter
                ended March 31, 2005 and filed with the Securities and Exchange Commission
                on May 16, 2005, and incorporated herein by reference).10.14
            
            Form
                of Stock Option Agreement (filed as Exhibit 10.1 to the Company’s
                quarterly report on Form 10-QSB for the quarter ended March 31, 2005
                and
                filed with the Securities and Exchange Commission on May 16, 2005,
                and
                incorporated herein by reference).10.15
            
            Agreementand Plan of Merger dated as of October 26, 2005 among the Company.,
                Sand Hill Merger Corp. and St. Bernard Software, Inc. (filed as
                Exhibit 2.1 to the Company’s Registration Statement on Form S-4 ,
                registration no. 333-130412, and incorporated herein by reference).10.16
            
            Amendment
                to Agreement and Plan of Merger, dated as of December 15, 2005, by
                and
                among Sand Hill IT Security Acquisition Corp., Sand Hill Merger Corp.
                and
                St. Bernard Software, Inc. (filed as Exhibit 2.2 to the Company’s
                Registration Statement on Form S-4, registration no. 333-130412, and
                incorporated herein by reference).14
            
            Code
                of Business Conduct and Ethics (filed as Exhibit 14 to the Company’s
                quarterly report on Form 10-QSB for the quarter ended June 30, 2004
                and
                filed with the Securities and Exchange Commission on September 8,
                2004 and
                incorporated herein by reference).23.1
            
            Consent
                of Independent Registered Public Account Firm**31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002*31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002*32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002*





*
            filed
                herewith


**
            previously
                filed






-30-
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          to Table of Contents**





(b)
            *Reports
                on Form 8-K*




Form
      8-K
      filed on January 13, 2005, including items 5.02 and 9.01.


Form
      8-K
      filed on January 27, 2005, including items 1.01, 8.01 and 9.01


Form
      8-K
      filed on April 4, 2005, including items 1.01


Form
      8-K
      filed on October 27, 2005, including items 1.01 and 9.01


Form
      8-K/A filed on October 28, 2004, including items 1.01 and 9.01


Form
      8-K
      filed on December 16, 2005, including item 4.02


Form
      8-K
      filed on December 19, 2005, including items 8.01 and 9.01


Form
      8-K/A filed on December 27, 2005, including items 4.02 and 9.01




**Item
      14.  Principal Accounting Fees and Services.**




The
      firm
      of Hein & Associates LLP acts as our principal accountant. The following is
      a summary of fees paid to our principal accountant for services
      rendered.




**AUDIT
      FEES**




During
      the fiscal year ended December 31, 2005, the fees for our principal accountant
      are $56,000 in connection with our registration statement on Form S-4, the
      review of our Quarterly Reports on Form 10-QSB and the audit of our December
      31,
      2005 Annual Report on Form 10-KSB.




During
      the fiscal year ended December 31, 2004, the fees for our principal accountant
      were $23,600 in connection with our initial public offering (financial
      statements included in the Form S-1 and Current Report on Form 8-K filed with
      the Securities and Exchange Commission on August 3, 2004), the review of our
      June 30 and September 30 Quarterly Reports on Form 10-QSB and the audit of
      our
      December 31, 2004 Annual Report on Form 10-KSB.




**AUDIT-RELATED
      FEES**




During
      2005, our principal accountant did not render assurance and related services
      reasonably related to the performance of the audit or review of financial
      statements.




During
      2004, our principal accountant did not render assurance and related services
      reasonably related to the performance of the audit or review of financial
      statements.




**TAX
      FEES**




During
      2005, the fees for our principal accountant are $11,000 in connection with
      tax
      compliance, tax advice and tax planning.




During
      2004, our principal accountant did not render services to us for tax compliance,
      tax advice and tax planning.




**ALL
      OTHER FEES**




During
      2005, there were no fees billed for products and services provided by the
      principal accountant other than those set forth above.




**AUDIT
      COMMITTEE APPROVAL**




We
      currently do not have an audit committee. Our Board of Directors approved the
      engagement of Hein Associates as our independent registered public accounting
      firm by unanimous consent on September 30, 2004.




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**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant has duly caused this annual report on Form 10-KSB/A to be signed
      on
      its behalf by the undersigned thereto duly authorized.




**SAND
                HILL
                IT SECURITY ACQUISITION CORP.**
              **(Registrant)**Date: 
June
              21, 2006
            By:
            /s/ Humphrey
              P. PolanenName:  
                Humphrey P. Polanen
              Title:    
                Chief Executive Officer






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**INDEX
      TO EXHIBITS**







(a)
            The
                following exhibits are filed as part of report
                K:




**Exhibit
                  No.**
              
              **Description**3.1
              
              Certificate
                  of Incorporation (incorporated by reference to Exhibit 3.1 of the
                  Company’s Registration Statement on Form S-1, registration
                  no. 333-114861, filed with the Securities and Exchange
                  Commission).3.2
              
              By-laws
                  (incorporated by reference to Exhibit 3.2 of the Company’s
                  Registration Statement on Form S-1, registration no. 333-114861,
                  filed with the Securities and Exchange Commission).4.1
              
              Specimen
                  Unit Certificate (incorporated by reference to Exhibit 4.1 of the
                  Company’s Registration Statement on Form S-1, registration
                  no. 333-114861, filed with the Securities and Exchange
                  Commission).4.2
              
              Specimen
                  Common Stock Certificate (incorporated by reference to Exhibit 4.2 of
                  the Company’s Registration Statement on Form S-1, registration
                  no. 333-114861, filed with the Securities and Exchange
                  Commission).4.3
              
              Specimen
                  Warrant Certificate (incorporated by reference to Exhibit 4.3 of the
                  Company’s Registration Statement on Form S-1, registration
                  no. 333-114861, filed with the Securities and Exchange
                  Commission).4.4.1
              
              Unit
                  Purchase Option No. UPO-2 dated July 30, 2004, granted to Newbridge
                  Securities Corporation (filed as Exhibit 4.4.1 to the Company’s annual
                  report on Form 10-KSB for the fiscal year ended 2004 (the “2004 10-K”) and
                  incorporated herein by reference).4.4.2
              
              Unit
                  Purchase Option No. UPO-3 dated July 30, 2004, granted to James
                  E. Hosch
                  (filed as Exhibit 4.4.2 to the 2004 10-K and incorporated herein
                  by
                  reference).4.4.3
              
              Unit
                  Purchase Option No. UPO-4 dated July 30, 2004, granted to Maxim
                  Group, LLC
                  (filed as Exhibit 4.4.3 to the 2004 10-K and incorporated herein
                  by
                  reference).4.4.4
              
              Unit
                  Purchase Option No. UPO-5 dated July 30, 2004, granted to Broadband
                  Capital Management, LLC (filed as Exhibit 4.4.4 to the 2004 10-K
                  and
                  incorporated herein by reference).4.4.5
              
              Unit
                  Purchase Option No. UPO-6 dated July 30, 2004, granted to I-Bankers
                  Securities Incorporated (filed as Exhibit 4.4.5 to the 2004 10-K
                  and
                  incorporated herein by reference).4.5
              
              Warrant
                  Agreement between American Stock Transfer & Trust Company and the
                  Registrant (filed as Exhibit 4.5 to the 2004 10-K and incorporated
                  herein
                  by reference).10.1
              
              Letter
                  Agreement among the Registrant, Newbridge Securities and I-Bankers
                  Securities Incorporated and Humphrey P. Polanen (filed as Exhibit
                  10.1 to the 2004 10-K and incorporated herein by
                  reference).10.2
              
              Letter
                  Agreement among the Registrant, Newbridge Securities and I-Bankers
                  Securities Incorporated and Cary M. Grossman (filed as Exhibit 10.2
                  to the 2004 10-K and incorporated herein by reference).10.3
              
              Letter
                  Agreement among the Registrant, Newbridge Securities and I-Bankers
                  Securities Incorporated and Daniel J. Johnson (filed as Exhibit 10.3
                  to the 2004 10-K and incorporated herein by reference).10.4
              
              Letter
                  Agreement among the Registrant, Newbridge Securities and I-Bankers
                  Securities Incorporated and Keith A. Walz (filed as Exhibit 10.4 to
                  the 2004 10-K and incorporated herein by reference).10.5
              
              Letter
                  Agreement among the Registrant, Newbridge Securities and I-Bankers
                  Securities Incorporated and Scott Broomfield (filed as Exhibit
                  10.5 to the
                  2004 10-K and incorporated herein by reference).10.6
              
              Letter
                  Agreement among the Registrant, Newbridge Securities and I-Bankers
                  Securities Incorporated and Alberto Micalizzi (filed as Exhibit
                  10.6 to
                  the 2004 10-K and incorporated herein by reference).10.8
              
              Investment
                  Management Trust Agreement between American Stock Transfer & Trust
                  Company and the Registrant (filed as Exhibit 10.8 to the 2004 10-K
                  and
                  incorporated herein by reference).10.9
              
              Stock
                  Escrow Agreement between the Registrant, American Stock Transfer
&
                  Trust Company and the Initial Stockholders (filed as Exhibit 10.9
                  to the
                  2004 10-K and incorporated herein by reference).10.10
              
              Registration
                  Rights Agreement among the Registrant and the Initial Stockholders
                  (filed
                  as Exhibit 10.10 to the 2004 10-K and incorporated herein by
                  reference).10.11
              
              Letter
                  Agreement between Sand Hill Security, LLC and Registrant regarding
                  administrative support (filed as Exhibit 10.11 to the 2004 10-K
                  and
                  incorporated herein by reference).10.12
              
              Revolving
                  Credit Agreement in the principle amount of $60,000 between the
                  Registrant
                  and Sand Hill Security, LLC (filed as Exhibit 10.12 to the 2004 10-K
                  and incorporated herein by reference).10.13
              
              M&A
                  Advisory Services Agreement, dated effective as of March 30, 2005,
                  by and
                  between the Company and Software Equity Group, L.L.C. (filed as
                  Exhibit
                  10.2 to the Company’s quarterly report on Form 10-QSB for the quarter
                  ended March 31, 2005 and filed with the Securities and Exchange
                  Commission
                  on May 16, 2005, and incorporated herein by reference).10.14
              
              Form
                  of Stock Option Agreement (filed as Exhibit 10.1 to the Company’s
                  quarterly report on Form 10-QSB for the quarter ended March 31,
                  2005 and
                  filed with the Securities and Exchange Commission on May 16, 2005,
                  and
                  incorporated herein by reference).10.15
              
              Agreementand Plan of Merger dated as of October 26, 2005 among the Company.,
                  Sand Hill Merger Corp. and St. Bernard Software, Inc. (filed as
                  Exhibit 2.1 to the Company’s Registration Statement on Form S-4 ,
                  registration no. 333-130412, and incorporated herein by reference).10.16
              
              Amendment
                  to Agreement and Plan of Merger, dated as of December 15, 2005,
                  by and
                  among Sand Hill IT Security Acquisition Corp., Sand Hill Merger
                  Corp. and
                  St. Bernard Software, Inc. (filed as Exhibit 2.2 to the Company’s
                  Registration Statement on Form S-4, registration no. 333-130412, and
                  incorporated herein by reference).14
              
              Code
                  of Business Conduct and Ethics (filed as Exhibit 14 to the Company’s
                  quarterly report on Form 10-QSB for the quarter ended June 30,
                  2004 and
                  filed with the Securities and Exchange Commission on September
                  8, 2004 and
                  incorporated herein by reference).23.1
              
              Consent
                  of Independent Registered Public Account Firm**31.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002*31.2
              
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002*32.1
              
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of 2002*
 
 *
              filed
                  herewith
 **
              previously
                  filed