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BAY ACQUISITION CORP.
0001098875
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Bay Acquisition Corp. (formerly: SecureLogic
Corp.) (the “Company”) is incorporated in Nevada.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is defined as a shell entity and
is actively seeking to merge, invest in or acquire other companies to generate revenues and profits.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The financial statements have been prepared
in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">FINANCIAL STATEMENTS IN U.S. DOLLARS</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The reporting currency of the Company is the
U.S. dollar (“dollar"). The dollar is the functional currency of the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">USE OF ESTIMATES</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
amounts reported and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual
results could differ from those estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">CASH AND CASH EQUIVALENTS</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at December
31, 2011 and December 31, 2010. The Company maintains cash balances at financial institutions that are insured by the Federal
Deposit Insurance Corporation (“FDIC”) up to federally insured limits. At times balances may exceed FDIC insured limits.
The Company has not experienced any losses in such accounts. </p>
<p style="margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">CONCENTRATION OF CREDIT RISKS</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash and cash equivalents. </p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="margin: 0">FAIR VALUE OF FINANCIAL INSTRUMENTS</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates that the fair value of
all financial instruments at December 31, 2011 and December 31, 2009, as defined in Accounting Standards Codification (“ASC”)
825-10, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying
balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value,
and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market
exchange.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">BENEFICIAL CONVERSION FEATURE AND ACCRETIVE
INTEREST EXPENSE</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under U.S. GAAP, a beneficial conversion feature
is required to be recognized on the date that a convertible instrument becomes convertible into equity shares and the fair market
value of those equity shares exceeds the conversion price under the convertible instrument. These amounts are recorded as a reduction
in the face value of the issued convertible or debt instrument with an offset going to additional paid-in-capital. This reduction
will accrete through the profit and loss statement as interest expense using the interest rate method over the life of the convertible
or debt instrument. In accordance with U.S. GAAP we recognized approximately $17,000 as a reduction to the face value of the Note
Payable as a discount at issuance, as disclosed in Note 7. For the year ended December 31, 2011 we amortized approximately $12,000
of the discount as non-cash interest expense in the accompanying financial statements in “Interest and other income, net”..</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">BASIC AND DILUTED NET LOSS PER SHARE</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 260-10 requires the presentation of basic
earnings (loss) per share ("basic EPS") and diluted earnings (loss) per share ("diluted EPS").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s basic loss per common share
is based on net loss for the relevant period, divided by the weighted average number of common shares outstanding during the period.  Diluted
loss per common share is based on net loss, divided by the weighted average number of common shares outstanding during the period,
including common share equivalents, such as outstanding stock options and beneficial conversion of related party accounts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Outstanding share options and shares issued
and reserved for outstanding share options have been excluded from the calculation of basic and diluted net loss per share to
the extent such securities are anti-dilutive</p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="margin: 0">INCOME TAXES</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for income taxes under
the provisions of ASC 740, “Income Taxes.” This pronouncement requires recognition of deferred tax assets and liabilities
for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement
of operations in the period in which the enactment rate changes. Deferred tax assets and liabilities are reduced through the establishment
of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets
will not be realized.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective January 1, 2007, the Company adopted
the provisions of FASB ASC 740-10-05, “Accounting for Uncertainties in Income Taxes” The ASC clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Federal, state and local income tax returns
for years prior to 2007 are no longer subject to examination by tax authorities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As reflected in the accompanying financial
statements, the Company’s operations for the years ended December 31, 2011 and 2010 resulted in a net income (loss) of $0
and $(20,000), respectively.  The Company’s ability to continue operating as a “going concern” is dependent
on its ability to raise sufficient additional working capital. Management’s plans in this regard include raising additional
cash from current stockholders and potential investors and lenders. As such, these factors raise substantial doubt as to the company's
ability to continue as a going concern.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These financials statements do not include
adjustments relating to the recoverability and classifications of recorded asset amounts and reclassification of liabilities that
might be necessary should the Company be unable to continue its existence.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The President and CEO of the Company, Mr. Paul
Goodman, had performed legal services for the Company and received remuneration in the amount of $0 for the years ended December
31, 2011 and 2010, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 11, 2009, the Company made a loan
to a stockholder of the Company in the amount of $171,000. The loan bears interest at a rate of 8% per annum and was due and payable
on May 15, 2010. In May 2010, a partial payment of $14,000 was received.  On October 3, 2012 the Company extended the
due date to December 31, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The tax effect of temporary differences, primarily
net operating loss carryforwards, gave rise to the Company's deferred tax asset in the accompanying December 31, 2011 and December
31, 2010 balance sheets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred income taxes are recognized for the
tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. Because
of the current uncertainty of realizing the benefit of the tax carry forward, a valuation allowance equal to the tax benefit for
deferred taxes has been established. The full realization of the tax benefit associated with the carry forward depends predominantly
upon the Company's ability to generate taxable income during the carry forward period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2011, the Company has net
operating loss carry forwards of approximately $9,183,000 that can be utilized to offset future taxable income for Federal income
tax purposes through 2030. Utilization of these net loss carry forwards is subject to the limitations of Internal Revenue Code
Section 382.   <br />
 </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred tax assets and liabilities reflect
the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes
and amounts used for income tax purposes.  Significant components of the Company's deferred tax assets and liabilities
are summarized as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="font-weight: bold"> </td>
<td style="font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td>
<td nowrap="nowrap" style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"> </td>
<td style="font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">2011</td>
<td nowrap="nowrap" style="font-weight: bold"> </td>
<td style="font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">2010</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td>Deferred tax asset:</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%">Net operating loss carryforwards</td>
<td style="width: 1%"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">3,673,000</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">3,673,000</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Less: Valuation allowance</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(3,673,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(3,673,000</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Net Deferred Tax Asset</td>
<td> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 13, 2012, the Company received an
additional convertible note payable (“2012 Note”) from Heriot Holdings Limited in the amount of $20,000. The loan bears
interest at a rate of 10% per annum and is due and payable on October 13, 2012. The 2012 Note is convertible into shares of the
Company’s common stock at $0.05 per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On  February 13, 2012, the Company
entered into a Stock Purchase Agreement (the “Agreement) with Goozex, Inc., a Maryland corporation (“Goozex”)
and the principal stockholders of Goozex for the acquisition of all of the outstanding and issued shares of Goozex (the “Goozex
Shares”) by the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In consideration for the sale of the Goozex
Shares, the stockholders of Goozex, at the closing, will receive (a) $150,000 in cash and (b) such number of newly issued shares
of the Company’s common stock which shall represent 15% of the issued and outstanding shares of the Company after taking
into account the Private Placement, described below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 11, 2012, the Company entered into an
Engagement Agreement with a registered broker-dealer (the “Broker-Dealer”) pursuant to which the Broker-Dealer agreed
to act as the Company’s placement agent for a private placement of units of the Company’s common stock  and
warrants in any amount of up to $2,000,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 18, 2011, the Company received a loan
from Heriot Holdings Limited in the amount of $17,000 (“2011 Note”). The loan bears interest at a rate of 10% per annum
and is due and payable on April 18, 2012. The loan is classified as “Convertible Note Payable” on the accompanying
consolidated balance sheet of the Company. As of the date of these financials the loan is in default and has not been converted.   The
Company is currently negotiating an extension.  The 2011 Note is convertible at $0.05.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under U.S. GAAP, a beneficial conversion feature
is required to be recognized on the date that a convertible instrument becomes convertible into equity shares and the fair market
value of those equity shares exceeds the conversion price under the convertible instrument. These amounts are recorded as a reduction
in the face value of the issued convertible or debt instrument with an offset going to additional paid-in-capital. This reduction
will accrete through the profit and loss statement as interest expense using the interest rate method over the life of the convertible
or debt instrument. In accordance with U.S. GAAP we recognized approximately $17,000 as a reduction to the face value of the Note
Payable as a discount at issuance. For the year ended December 31, 2011 we amortized approximately $12,000 of the discount as
non-cash interest expense in the accompanying financial statements in “Interest and other income, net”. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Convertible Note Payable obligations as of December 31, 2011 and
2010 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td style="font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">2011</td>
<td nowrap="nowrap" style="font-weight: bold"> </td>
<td style="font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">2010</td>
<td nowrap="nowrap" style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%">Convertible Note Payable</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">17,000</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Less: Debt Discount</td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(5,000</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">12,000</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
</table>
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23422663
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14247000
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23422663
23422663
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