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

FORM 10-QSB/A

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the quarterly period 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: 000-49724

ACIES CORPORATION
(Name of Small Business Issuer in its charter)

 
Nevada
  
91-2079553
(State or other jurisdiction
of incorporation or organization)
  
(IRS Employer Identification No.)

14 Wall Street, Suite 1620, New York, New York 10005
(Address of principal executive offices)

(800) 361-5540
(Issuer's telephone number)

Check whether issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
 
APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of February 6, 2006, the issuer had 48,463,751shares of common stock, par value $.001 per share, issued and outstanding.

Transitional Small Business Issuer Format (Check One): Yes o No x|




ACIES CORPORATION

DECEMBER 31, 2005 QUARTERLY REPORT ON FORM 10-QSB/A

TABLE OF CONTENTS
 
Explanatory Note
 
We are filing this Amendment No. 1 on Form 10-QSB for the periods ended December 31, 2005 for the purpose of amending certain information appearing in the 10-QSB in Part I Item 1 and in Item 2 Management’s Discussion and Analysis, Overview section. In those sections we have corrected for an error relating to the accounting for certain merchant terminal equipment which was placed at merchant locations with ownership maintained by the Company. The previously issued financial statements for the periods ended December 31, 2005 erroneously presented the cost relating to this equipment in the statement of operations as an expense included in cost of revenue. The net impact of correcting the error on the statements of operations for the three and nine months ended December 31, 2005 is to reduce the net loss by $43,763 and $112,007 respectively.
 

 
Page
   
PART I - FINANCIAL INFORMATION
  
   
Item 1. Financial Statements (unaudited)
  
   
Consolidated Balance Sheet
3
   
Consolidated Statements of Operations
4
   
Consolidated Statements of Cash Flows
5
   
Notes to Consolidated Financial Statements
6
   
Item 2. Management's Discussion and Analysis
10
   
Item 3. Controls and Procedures
12
   
PART II - OTHER INFORMATION
  
   
Item 1. Legal Proceedings
14
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
14
   
Item 3. Defaults Upon Senior Securities
14
   
Item 4. Submission of Matters to a Vote of Security Holders
14
   
Item 5. Other Information
14
   
Item 6. Exhibits
14
   
SIGNATURES
15

 

2
 
 
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ACIES CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
As of December 31, 2005 (As Restated)
 
ASSETS
  
 
  
Current Assets
  
 
  
Cash
  
$
14
  
Accounts receivable, net
    
1,108,640
  
Total current assets
    
1,108,654
  
         
Prepaid assets and deposit
    
41,042
  
Merchant terminal equipment, net of accumulated depreciation of $14,921
    
112,007
  
Fixed assets, net of accumulated depreciation of $9,007
    
33,180
  
         
 Total Assets
  
$
1,294,883
  
LIABILITIES AND SHAREHOLDERS' EQUITY
        
Current Liabilities
      
Accounts payable
  
$
940,684
  
Accrued expenses
    
11,784
  
Note payable to officer
    
50,000
  
Total current liabilities
    
_______1,002,468_
  
 
      
Commitment and contingencies
    
-
  
 
      
Shareholders' Equity
      
Common stock, $.001 par value, 200,000,000 shares
      
authorized, 46,813,751 shares issued and outstanding
    
46,814
  
Additional paid in capital
    
4,134,203
  
Accumulated deficit
    
(3,888,602
)
 Total shareholders’ equity
    
292,415
  
 Total Liabilities and Shareholders’ Equity
  
$
1,294,883
  
 
 
See summary of significant accounting policies
and notes to financial statements.

3
 
ACIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three and Nine Months Ended December 31, 2005 (As Restated) and 2004


   
Three Months Ended December 31
 
Nine Months Ended December 31
 
 
 
2005
 
2004
 
2005
 
2004
  
   
(As Restated)
 
 
 
(As Restated)
      
                   
Net revenues
  
$
2,716,075
  
$
1,160,607
  
$
6,409,761
  
$
2,739,579
  
Cost of revenues
    
2,217,883
    
924,290
   
5,333,643
   
2,237,797
 
Gross margin
    
498,192
    
236,317
   
1,076,118
    
501,782
  
                           
General, administrative and selling
    
520,385
    
576,220
   
1,526,282
   
3,128,567
  
                           
Operating loss
    
(22,193
)
  
(339,903
)
  
(450,164
)
  
(2,626,785
)
                           
Loss on extinguishment of debt
    
-
    
(72,447
)
  
(28,453
)
  
(72,447
)
Interest expense
    
-
    
(3,000
)
  
(1,063
)
  
(6,000
)
Interest income
    
108
   
9
   
4,087
    
61
 
                           
Net loss
  
$
(22,085
)
$
(415,341
)
$
(475,593
)
$
(2,705,171
)
                           
                           
Basic and diluted net loss per share
  
$
(0.00
)
$
(0.01
)
$
(0.01
)
$
(0.09
)
Weighted average shares outstanding
    
47,164,597
    
37,433,686
   
47,757,258
    
31,890,301
 

See summary of significant accounting policies
and notes to financial statements.
 
4

ACIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended December 31, 2005 (As Restated) and 2004


 
  
Nine Months Ended December 31 
 
 
  
2005
  
2004
  
CASH FLOWS FROM OPERATING ACTIVITIES
  
 
  
 
  
Net loss
  
$
(475,593
)
$
(2,705,171
)
Adjustments to reconcile net loss to cash used in
operating activities:
              
Depreciation expense - fixed assets and merchant equipment
   
20,996
   
1,866
  
Loss on extinguishment of debt
   
28,453
    
72,447
 
Bad debt expense
    
5,407
    
-
  
Stock issued for services and refinancing
    
-
    
1,862,990
  
Note payable issued for services
    
-
    
200,000
  
Warrant expense
          
32,653
  
Changes in assets and liabilities:
          
Accounts receivable
    
(670,358
)
  
(326,711
)
Prepaid expenses and deposit
    
(5,000
)
  
(36,042
)
Stock payable
    
-
    
18,000
  
Accounts payable and accrued expenses
    
446,569
   
243,614
  
CASH FLOWS USED IN OPERATING ACTIVITIES
    
(649,526
)
  
(636,354
)
               
CASH FLOWS USED IN INVESTING ACTIVITIES
              
Purchase of merchant terminal equipment
    
(126,928
)
      
Purchase of fixed assets
    
(16,896
)
  
(20,578
)
               
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
              
Proceeds from note payable to officer
    
50,000
    
-
  
Repurchase of common stock
    
(5,000
)
  
-
  
Proceeds from sale of common stock
    
-
    
650,000
  
CASH FLOWS FROM FINANCING ACTIVITIES
    
45,000
    
650,000
  
               
NET CHANGE IN CASH
    
(748,350
)
  
(6,932
)
Cash, beginning of period
    
748,364
    
7,847
  
Cash, end of period
 
$
14
  
$
915
  
               
Supplemental disclosures:
              
Cash paid for interest
  
$
1,000
  
$
-
  
               
Non-cash items:
              
Conversion of debt to stock
  
$
134,400
  
$
102,522
  


See summary of significant accounting policies `
and notes to financial statements.

5


ACIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Acies Corporation ("Acies") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in Acies' Annual Report filed with the SEC on Form 10-KSB for the year ended March 31, 2005. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the year ended March 31, 2005 as reported in the 10-KSB have been omitted. Our fiscal year ends on March 31. References to a fiscal year refer to the calendar year in which such fiscal year ends.

NOTE 2 - RESTATEMENT OF PREVIOUSLY ISSUED INTERIM FINANCIAL STATEMENTS AND MERCHANT TERMINAL EQUIPMENT
 
The accompanying unaudited interim financial statements of Acies have been amended and restated. Acies typically places point of sale equipment at certain merchant locations as an inducement to generate revenue from processing services. Acies owns the equipment and typically receives a deposit thereon from the merchant. Should the merchant cease to be a customer, the equipment is returned to Acies for redeployment to a different merchant location, and the deposit returned to the merchant.

This equipment was expensed in our previously issued financial statements for this period; however, the appropriate accounting treatment should have been to capitalize the equipment, and depreciate it over a period of three years. This more appropriately matches expense with the revenue generated as the merchant agreements are for three years or longer.
 
The marketing approach of placing such equipment as described above commenced in a significant fashion in fiscal 2006, prior to which any such equipment placements were nominal. The company properly reported the accounting treatment for this equipment in its Annual Report on Form 10-KSB; however, we incorrectly reported the accounting treatment for this equipment in our previously issued financial statements for the periods ended September 30, 2005, and December 31, 2005, wherein this equipment was expensed and included in our cost of revenues. This amendment and restatement is required as correction of an error pursuant to Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections.” The equipment was valued as follows as December 31, 2005.
 
 
Description
  
Life 
  
Amount
 
Merchant terminal equipment
    
3 years
  
$
126,928
  
Less: accumulated depreciation
        
(14,921
)
         
$
112,007
  
 


6
 
The effects on the previously issued interim financial statements are as follows:
Balance Sheet at December 31, 2005:

   
As Previously
Reported
  
Impact
  
Restated Amount
  
               
Total assets
  
$
1,182,876
  
$
112,007
  
$
1,294,883
  
Total shareholders’ equity
   
180,408
    
112,007
    
292,415
  


Statement of Operations for the three-months ended December 31, 2005:

   
As Previously
Reported
  
Impact
  
Restated Amount
  
               
Cost of revenues
  
$
2,285,933
  
$
(68,050
)
$
2,217,883
  
Operating loss
    
(90,243
)
  
68,050
    
(22,193
)
Net loss
    
(90,135
)
  
68,050
    
(22,085
)

Statement of Operations for the nine-months ended December 31, 2005:

   
As Previously Reported
 
Impact
 
Restated
Amount
  
               
Cost of revenues
  
$
5,445,650
  
$
(112,007
)
$
5,333,643
  
Operating loss
    
(562,171
)
  
112,007
   
(450,164
)
Net loss
    
(587,600
)
  
112,007
   
(475,593
)

NOTE 3 - STOCK-BASED COMPENSATION

Acies accounts for its employee stock-based compensation plans under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. During the fiscal year ended March 31, 2005, Acies granted 2,768,737 options to purchase common stock to employees, which vest every quarter over three years. In May 2005, Acies granted 922,900 options to an employee, which vest every quarter over two years. In September 2005, Acies granted 100,000 options to an independent director, which vest every quarter over two years. All of the options have an exercise price of $1.00 and expire 5 years from the date of grant. Acies recorded compensation expense of $0 under the intrinsic value method during the three and nine months ended December 31, 2005.

The following table illustrates the effect on net loss and net loss per share if, Acies had applied the fair value provisions of FASB Statement No. 123R, Accounting for Stock-Based Compensation, to stock-based employee compensation for the periods ended December 31:

7

   
Three Months Ended December 31
  
Nine Months Ended December31
  
   
2005
  
2004
  
2005
  
2004
  
Net loss as reported
  
$
(22,085
)
$
(415,341
)
$
(475,593
)
$
(2,705,171
)
Add:   stock-based
                          
compensation
                          
determined under
                          
intrinsic value
    
-
    
-
    
-
    
-
  
Less:  compensation
                          
determined under
                          
fair value-
                          
based method
    
(38,589
)
  
(23,702
)
  
(114,647
)
  
(47,404
)
                           
Pro forma net loss
  
$
(60,674
)
$
(439,043
)
$
(590,240
)
$
(2,752,575
)
                           
Basic and diluted net loss
                          
per common share:
                          
As reported
  
$
(0.00
)
$
(0.01
)
$
(0.01
)
$
(0.09
)
Pro forma
  
$
(0.00
)
$
(0.01
)
$
(0.01
)
$
(0.09
)

The weighted average fair value at December 31, 2005 of all stock options granted was $0.11. Variables used in the Black-Scholes option-pricing model include (1) 2% risk-free interest rate, (2) expected option life is the actual remaining life of the options as of each year end, (3) expected volatility was zero (minimal value), and (4) zero expected dividends.
 
NOTE 4 - EXTINGUISHMENT OF DEBT

Pursuant to an agreement dated November 17, 2004 with M&A Capital Advisers (“M&A”), 700,000 shares of Acies common stock were held by M&A as collateral for a note in the amount of $100,000. Under the terms of the agreement, as of May 31, 2005, Acies converted the note payable into the Acies common stock which had been held as collateral, which was valued at $134,400 at the time of the conversion. After accounting for the principal and accrued interest repayment, the remaining amount of $28,453 was charged to loss on extinguishment of debt.
 
NOTE 5 - NOTE PAYABLE TO OFFICER

On December 30, 2005, Acies borrowed $50,000 from Oleg Firer, President and Chief Executive Officer, pursuant to a Promissory Note under which terms interest would accrue to Mr. Firer at 8% per annum. The principal of the Note was repaid in full on January 11, 2006, and any interest was forgiven.

NOTE 6 - RETIREMENT OF COMMON STOCK

On October 27, 2005, Acies retired 1,241,456 shares of common stock in two separate transactions. In settlement of a claim against a former officer of the Company, 1,041,456 shares of common stock were returned and retired in exchange for $5,000. Pursuant to the Exchange Agreement in connection with the reverse merger through which Acies became a public company, a third-party company which had provided services to Acies in exchange for common stock returned 200,000 shares which were retired. Giving effect to these transactions, and the restricted stock award discussed in Note 6, as of February 6, 2006, Acies had 48,463,751 common shares outstanding.


8

 
NOTE 7 - SUBSEQUENT EVENT - RESTRICTED STOCK AWARD

Effective February 1, 2006, Acies awarded 1,650,000 shares of common stock to its chief financial officer, Jeffrey A. Tischler. All of the shares are unregistered, 825,000 shares vested as of February 1, 2006, with the remaining 825,000 shares vesting as of August 1, 2006 assuming Mr. Tischler still has an employment or service relationship with the company.
 
9

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD LOOKING STATEMENTS

Some of the statements contained in this Form 10-QSB that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," “will,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-QSB, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

1. Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

2. Our ability to generate customer demand for our services;

3. The intensity of competition; and

4. General economic conditions.

The foregoing is not intended to be an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by Acies Corporation. Investors are encouraged to review the risk factors set forth in Acies Corporation’s most recent Form 10-KSB as filed with the Securities and Exchange Commission in June 2005.

All written and oral forward-looking statements made in connection with this Form 10-QSB that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

OVERVIEW

Acies Corporation ("Acies"), through its wholly owned subsidiary Acies, Inc., is engaged in the business of delivering payment processing and online banking solutions to small, medium and large size merchants across the United States. Our fiscal year ends on March 31. References to a fiscal year refer to the calendar year in which such fiscal year ends.

On July 2, 2004, we acquired approximately 99.2%, and subsequently thereto acquired the remaining 0.8%, of the issued and outstanding common stock of Acies in exchange for 26,150,000 newly issued shares of our common stock pursuant to an Exchange Agreement whereby Acies became our wholly-owned subsidiary (the "Exchange"). As a result of the Exchange, control of our company shifted to the former shareholders of Acies.

On July 13, 2004, we entered into an agreement with Terence Channon, our former President and Chief Executive Officer, whereby we agreed to transfer all of our assets held immediately prior to the Exchange, and all of our then existing liabilities, to Terence Channon in consideration for Mr. Channon's cancellation of 4,285,000 shares of our common stock. To facilitate this agreement, we also entered into an agreement with a third party to purchase 200,000 shares of our common stock held by a third party for $.001 per share (or an aggregate of $200), which shares our Board of Directors have also approved for cancellation.

Our principal executive offices are located at 14 Wall Street, Suite 1620, New York, NY 10005 and our telephone number is (800) 361-5540. We are incorporated in the State of Nevada.

RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 2005 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 2004

REVENUES

Net revenues increased $1,555,468 (or 134%) to $2,716,075 for the three months ended December 31, 2005, as compared to net revenues of $1,160,607 for the three months ended December 31, 2004. The increase in net revenues was principally due to an increase in merchant processing revenues resulting from the addition of new customers.

Cost of revenues increased $1,293,593 (or 140%) to $2,217,883 for the three months ended December 31, 2005, as compared to cost of revenues of $924,290 for the three months ended December 31, 2004. The increase in cost of revenues was principally attributable to the increase in merchant processing costs that resulted from increasing merchant processing revenues.

10

Gross margin increased $261,875 (or 111%) to $498,192 for the three months ended December 31, 2005, as compared to gross margin of $236,317 for the three months ended December 31, 2004. The increase in gross margin is directly attributable to the increase in net revenues that was partially offset by the increase in costs of revenues.

GENERAL, ADMINISTRATIVE AND SELLING EXPENSES

General, administrative and selling ("G&A") expense decreased $55,835 (or 10%) to $520,385 for the three months ended December 31,2005, as compared to G&A expense of $576,220 for the three months ended December 31,2004. The decrease in G&A expense was primarily attributable to the Company having incurred in the prior year period expenses for services in connection with becoming a public company, which was principally paid for with the issuance of common stock valued at $250,000, offset by increases in salaries, insurance and other G&A expenses reflecting the growth of the Company.

INTEREST EXPENSE AND INTEREST INCOME

We had no interest expense and insignificant interest income for the three months ended December 31, 2005, as compared to $3,000 of interest expense and insignificant interest income for the three months ended December 31,2004.

NET LOSS

We had a net loss of $22,085 for the three months ended December 31, 2005, as compared to a net loss of $415,341 for the three months ended December 31,2004. The decrease in net loss is principally attributable to the increase in gross margin, with an additional positive impact resulting from the decrease in G&A expense.

RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 2005 COMPARED WITH NINE MONTHS ENDED DECEMBER 31, 2004

REVENUES

Net revenues increased $3,670,182 (or 134%) to $6,409,761 for the nine months ended December 31, 2005, as compared to net revenues of $2,739,579 for the nine months ended December 31, 2004. The increase in net revenues was principally due to an increase in merchant processing revenues resulting from the addition of new customers.

Cost of revenues increased $3,095,846 (or 138%) to $5,333,643 for the nine months ended December 31, 2005, as compared to cost of revenues of $2,237,797 for the nine months ended December 31, 2004. The increase in cost of revenues was principally attributable to the increase in merchant processing costs that resulted from increasing merchant processing revenues.

Gross margin increased $574,336 (or 114%) to $1,076,118 for the nine months ended December 31, 2005, as compared to gross margin of $501,782 for the nine months ended December 31, 2004. The increase in gross margin is directly attributable to the increase in net revenues that was partially offset by the increase in costs of revenues.

GENERAL, ADMINISTRATIVE AND SELLING EXPENSES

General, administrative and selling ("G&A") expense decreased $1,602,285 (or 51%) to $1,526,282 for the nine months ended December 31, 2005, as compared to G&A expense of $3,128,567 for the nine months ended December 31, 2004. The decrease in G&A expense was primarily attributable to the Company having incurred in the prior year period expenses for services in connection with becoming a public company, which was principally paid for with the issuance of common stock valued at $1,862,990.

LOSS ON EXTINGUISHMENT OF DEBT

During the nine months ended December 31, 2005, the Company incurred a loss of $28,453 on extinguishment of debt resulting from the conversion of $100,000 of debt and $5,947 of accrued interest into 700,000 shares of common stock. During the nine months ended December 31, 2004 we incurred a loss of $72,447 on extinguishment of debt resulting from the conversion of $100,000 of debt and $2,522 of accrued interest into 700,000 shares of common stock.

INTEREST EXPENSE AND INTEREST INCOME

We had interest expense of $1,063 and interest income of $4,087 for the nine months ended December 31, 2005, as compared to $6,000 of interest expense and insignificant interest income for the nine months ended December 31, 2004.

NET LOSS

We had a net loss of $475,893 for the nine months ended December 31, 2005, as compared to a net loss of $2,705,171 for the nine months ended December 31, 2004. The decrease in net loss is principally attributable to the decrease in G&A expense, with additional positive impact from the increase in gross margin.

11

LIQUIDITY AND CAPITAL RESOURCES

Total current assets as of December 31, 2005 were $1,108,654, consisting almost entirely of net accounts receivable. Total current liabilities of $1,002,468 consisted of $940,685 in accounts payable, $11,784 in accrued expenses, and a $50,000 note payable to Oleg Firer, President and Chief Executive Officer of the Company. The Company borrowed these funds on December 31, 2005 and repaid the note in full on January 11, 2006. As of December 31, 2005, we had working capital of $106,186. The ratio of current assets to current liabilities was 111% as of December 31, 2005.

Cash used in operating activities was $649,526 during the nine months ended December 31, 2005, as compared with $636,354 during the nine months ended December 31, 2004. The increase in cash used in operating activities reflects the outlays necessary to achieve the growth in revenues, which should ultimately result in positive operating cash flow.

As of May 31, 2005, Acies converted $105,947 of debt and accrued interest into 700,000 shares of stock, which had been held by M&A Capital Advisers (“M&A”) as collateral, valued at $134,400 (See Note 3 to the financial statements).
 
While Acies believes that it has sufficient current assets and operating cash flow to sustain operations at its present level through the next twelve months of operation, continued growth and reaching sustained profitability would require additional financing. With no debt subsequent to January 11, 2006, the Company is currently seeking and believes it can secure adequate financing through various debt and/or equity channels. We do not have any commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders. There is no assurance that additional financing will be available on favorable terms, if at all. If we should need to and are unable to raise such additional financing, it would have a materially adverse effect upon our operations and our ability to fully implement our business plan.

OFF BALANCE SHEET ARRANGEMENTS

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

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities. On an on-going basis, we evaluate our estimates. We base our estimates on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Substantially all of our revenue is derived from providing credit and debit card processing services, and it is recognized when the services are rendered.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123R, only certain pro forma disclosures of fair value were required. SFAS No. 123R shall be effective for small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The impact of the adoption of this new accounting pronouncement would be similar to Acies’ calculation of the pro forma impact on net income of FAS 123 included in the footnotes to the financial statements.
 
Item 3. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to its management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We maintain that the controls and procedures in place do provide reasonable assurance that all necessary disclosures are communicated as required.

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Subsequent to the end of the period covered by this interim report, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that all material information required to be disclosed in this report has been made known to him in a timely fashion. This conclusion was based on a delay in our ability to correct an error wherein, based on a change in marketing strategy, certain merchant terminal equipment which was placed at merchant locations but continued to be owned by the Company was expensed when it should have been capitalized and subsequently depreciated over a three-year period. The correction of this error resulted in the restatement of our previously issued interim reports on Form 10-QSB for the quarter ended December 31, 2005. For the quarter ended December 31, 2005 correcting this error resulted in a positive impact to reduce the net loss in the three and nine-month period by $43,957 and $112,007, respectively.

The delay in the correction of this error was based on the difficulty of gathering the proper data for specific identification of all equipment, and has been appropriately recorded and disclosed in this Form 10Q-SB/A. We are in the process of improving our internal control over financial reporting in an effort to remediate this deficiency through improved supervision and training of our staff to properly control and maintain records relating to merchant terminal equipment. This deficiency has been disclosed to our Board of Directors. We believe that this effort is sufficient to fully remedy this deficiency and we are continuing our efforts to improve and strengthen our control processes and procedures. Our Chief Financial Officer and directors will continue to work with our auditors and other outside advisors to ensure that our controls and procedures are adequate and effective.

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Part II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not subject to any legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None. 

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
Number
  
Description
     
10.1
  
Restricted Stock Award Agreement (filed herewith)
     
31.1
  
Certification by Oleg Firer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
31.2
  
Certification by Jeffrey A. Tischler, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
32.1
  
Certification by Oleg Firer, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
32.2
  
Certification by Jeffrey A. Tischler, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)

 
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 18th day of July 2006.
 
     
  ACIES CORPORATION
 
 		  
 		  
 
  By:   /s/ Oleg Firer
 
Oleg Firer
  Chief Executive Officer
 
     
  By:   /s/ Jeffrey A. Tischler
 
Jeffrey A. Tischler
  Chief Financial Officer

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

SIGNATURE
 
TITLE
 
DATE
         
         
By: /s/ Oleg Firer
 
Chairman of the Board,
 
July 18, 2006
Oleg Firer
  
President and Chief
Executive Officer
    
 
  
 
    

 
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