acies10q123108.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from ____________ to ______________

Commission file number: 000-49724

ACIES CORPORATION

(Name of registrant in its charter)

Nevada	7389	91-2079553
(State or jurisdiction	(Primary Standard	(IRS Employer
of incorporation or	Industrial	Identification No.)
organization)	Classification
	Code Number)

132 West 36th Street, 3rd Floor

New York, New York 10018

(Address of principal executive offices)

14 Wall Street, Suite 1620

New York, New York 10005

(Former Address of principal executive offices)

(646) 214-2880

(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x

As of February 10, 2009, the registrant had 73,984,095 shares of common stock, $0.001 par value per share, outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACIES CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31, 2008		March 31, 2008
ASSETS
Current Assets
Cash	$	-	$	41,398
Accounts receivable		615,267		1,083,705
Other current assets		-		16,295
Total current assets		615,267		1,141,398

Other assets and deposits		32,281		67,921
Fixed assets, net of accumulated depreciation of $40,693 and $35,892, respectively		13,715		18,516
Merchant Terminal Equipment, net of accumulated depreciation of $231,337 and $187,317, respectively		4,415		48,435
Total Assets	$	665,678	$	1,276,270

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Notes payable - current portion	$	287,349	$	800,677
Accounts payable and accrued expenses		961,235		1,360,280
Deferred revenue		92,398		96,233
Merchant equipment deposits		18,810		18,810
Total current liabilities		1,359,792		2,276,000

Long – term notes payable to officer		185,000		-
Long – term notes payable – Pinnacle Three Corporation		183,653		-
Long - term portion of notes payable		34,324		102,010
Deferred rent and other obligations		-		70,694
Total Liabilities		1,762,769		2,448,704

Commitment and contingencies

Shareholders' Deficit
Preferred stock, Series A, $0.001 par value, 44,340 shares authorized, no shares issued and outstanding		-		-
Common stock, $0.001 par value, 200,000,000 shares authorized, 73,984,095 and 51,469,095 shares issued and outstanding		73,984		51,469
Additional paid-in capital		5,350,181		4,891,729
Accumulated deficit		(6,521,256)		(6,115,632)
Total Shareholders' Deficit		(1,097,091)		(1,172,434)
Total Liabilities and Shareholders' Deficit	$	665,678	$	1,276,270

The accompanying notes are an integral part of these consolidated financial statements.

F-1

ACIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months and Nine Months Ended December 31, 2008 and 2007

(Unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2008			2007			2008			2007

Revenues	$	1,640,085		$	3,323,344		$	7,289,631		$	9,968,838
Cost of revenues		1,486,286			2,922,725			6,508,261			8,788,530
Gross margin		153,899			400,619			781,370			1,180,308

General, administrative and selling		97,778			427,335			1,090,521			1,555,075
Operating income (loss)		56,121			(26,717	)		(309,151	)		(374,767	)


Interest expense		(21,739	)		(45,049	)		(96,473	)		(112,923	)

Net income (loss)	$	34,382		$	(71,765	)	$	(405,624	)	$	(487,690	)

Loss per share – Basic and diluted	$	0.00		$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average shares outstanding – Basic and diluted		73,984,095			51,469,095			65,223,713			51,301,095

The accompanying notes are an integral part of these consolidated financial statements.

F-2

ACIES CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT

For the Nine Months Ended December 31, 2008

(Unaudited)

	Common Stock				Additional
					Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, March 31, 2008		51,469,095	$	51,469	$	4,891,729	$	(6,115,632	)	$	(1,172,434	)

Issuance of restricted stock for conversion of debt and interest		22,515,000		22,515		427,785					450,300

Stock-based compensation - restricted stock						3,667					3,667

Stock-based compensation – amortization of option expense		-		-		27,000					27,000

Net loss		-		-				(405,624	)		(405,624	)
Balance, December 31, 2008		73,984,095	$	73,984	$	5,350,181	$	(6,521,256	)	$	(1,097,091	)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

ACIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended December 31, 2008 and 2007

(Unaudited)

	Nine Months Ended December 31,
	2008			2007

CASH FROM OPERATING ACTIVITIES
Net loss	$	(405,624	)	$	(487,690	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation		30,667			67,319
Depreciation expense		48,821			68,702
Changes in assets and liabilities:
Accounts receivable		468,438			(246,215	)
Other current assets		16,295			(8,686	)
Other assets and deposits		35,640			(11,073	)
Accounts payable and accrued expenses		(213,745	)		224,279
Deferred revenue		(3,835	)		(20,979	)
Deferred rent		(70,694	)		-
CASH USED IN OPERATING ACTIVITIES		(94,037	)		(414,343	)

CASH FROM INVESTING ACTIVITIES:
Purchases of fixed assets		-			(6,839	)
CASH USED IN INVESTING ACTIVITIES		-			(6,839	)

CASH FROM FINANCING ACTIVITIES
Proceeds from notes payable		733,653			1,090,000
Repayment of notes payable		(681,014	)		(503,261	)
Repayment of loan from officer		-			(40,042	)
CASH PROVIDED BY FINANCING ACTIVITIES		52,639			546,697

NET CHANGE IN CASH		(41,398	)		125,515
Cash, beginning of period		41,398			1,827
Cash, end of period	$	-		$	127,342

Supplemental disclosures:
Cash paid for interest and debt-related fees	$	96,473		$	112,924
Cash paid for income taxes		-			-

Non-cash investing and financing activities:
Note payable to officer issued for accounts payable and accrued expenses	$	185,000		$	-
Conversion of debt and accrued interest to common stock		450,300			-

The accompanying notes are an integral part of these consolidated financial statements.

F-4

ACIES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Acies Corporation ("Acies" or the “Company”) 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-K for the year ended March 31, 2008. 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, 2008 as reported in the 10-K 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.

Summary of Significant Accounting Policies

The accounting policies of Acies are contained in the March 31, 2008 Form 10-K. The following are the more significant policies.

Revenue recognition. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Substantially all of Acies’ revenue is derived from providing credit and debit card processing services, and it is recognized when the services are rendered. Revenue is deferred and recorded over the required service period if all revenue criteria have not been met when the fee is received. When a merchant has a business transaction for processing (e.g., purchases of goods or services for which payments are accepted using credit or debit cards), the amount that is discounted from the transaction amount prior to the merchant receiving net proceeds is the amount that Acies recognizes as revenue. Revenue is recognized on a gross basis (i.e., prior to deducting expenses paid to third parties for outsourced processing and settlement services), with such determination based on Acies’ review and interpretation of current accounting promulgations, including but not limited to Emerging Issues Task Force Memorandum 99-19 “Reporting Revenue Gross as Principal versus Net as an Agent” (“EITF 99-19”). The indicators of gross revenue reporting which led to our determination included, but were not limited to, the extent to which Acies has latitude in establishing price, our credit risk and our discretion in supplier selection. Any revenue relating to services to be performed in the future is deferred and recognized on a straight-line basis over the period during which the services will be performed.

Use of estimates. In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 2 – GOING CONCERN

Acies has limited capital resources and has incurred significant historical losses and negative cash flows from operations. Acies believes that funds that will be available from its operations and existing financing will not be adequate to finance its operating requirements and its financial obligations under its notes payable for the next twelve months. During the current fiscal year, Acies has obtained additional financing of $100,000 through the existing loan and security agreement and $450,000 in June 2008 through the execution of a promissory note, which was subsequently converted into shares of Acies common stock (see Note 3). During the months of August and September 2008, Acies executed another convertible promissory note with Pinnacle Three Corporation for an additional $183,653. These funds only alleviated its short-term capital needs. Acies believes that it can secure additional capital through debt and/or equity financing, and has received proposals from potential lenders, which are currently in negotiation. Acies does not, however, have any commitments or identified sources of additional capital from third parties or from its officers, directors or majority shareholders. There is no assurance that additional financing will be available on favorable terms, if at all. If Acies is unable to raise such additional financing, it would have a materially adverse effect upon its operations and its ability to fully implement its business plan, which would limit Acies’ ability to continue as an on-going business. Failure of Acies’ operations to generate sufficient future cash flow and failure to raise additional financing could have a material adverse effect on Acies' ability to continue as a going concern and to achieve its business objectives. These conditions raise substantial doubt about Acies’ ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets or the amount of liabilities that might result should Acies be unable to continue as a going concern.

F-5

NOTE 3 - NOTES PAYABLE

On October 31, 2006, Acies entered into a Loan and Security Agreement with RBL Capital Group, LLC (“RBL”). The Loan and Security Agreement provides a term loan facility with a maximum borrowing of $2,000,000. Each borrowing under this facility is to be repaid in 18 equal monthly installments from the date of the borrowing, each of which includes amortization of the principal amount of the borrowing as calculated using the interest method. A tri-party agreement between Acies, RBL and Chase Alliance Partners, LLC (“Chase”, to whom Acies outsources certain processing services for the majority of its merchant accounts) arranges for monthly installments to be paid such that Chase forwards to RBL the entire monthly amounts due to Acies and, after deducting the monthly installment, the balance is remitted to Acies within 24 hours. The Loan and Security Agreement requires that accelerated payments of 150% of the monthly installment are required to be paid if certain cash flow ratios are not maintained. Borrowings generally bear interest at a fixed rate per annum of prime at the time of the borrowing plus 8.90%. Each borrowing under the facility has been at an interest rate of 17.15%, except for September and December 2007, and February, March and April 2008 drawdowns, which bear interest at 16.65%, 16.15%, 14.90%, 14.18% and 15.01%, respectively.

In addition, the Loan and Security Agreement contains customary affirmative and negative covenants for credit facilities of this type, including covenants with respect to liquidity, disposition of assets, liens, other indebtedness, investments, shareholder distributions, transactions with affiliates, officers’ compensation, and the transfer or sale of our merchant base, and that there are no significant changes in our business. In addition, should Acies sell more than 25% of its merchant accounts for which certain processing services are outsourced to Chase, that event would require that borrowings under the facility be repaid in full. Also, should Acies transfer the outsourcing of certain processing services for merchant accounts for which Chase currently provides such services to a different third-party, that event would require either an agreement between Acies, RBL and the third-party similar to the agreement currently in place between Acies, RBL and Chase, or that borrowings under the facility be repaid in full.

The Loan and Security Agreement additionally provides for customary events of default with corresponding grace periods, including the failure to pay any principal or interest when due, failure to comply with covenants, material misrepresentations, certain bankruptcy, insolvency or receivership events, imposition of certain judgments and the liquidation or merger of Acies. Acies’ obligations under the Loan and Security Agreement are secured by substantially all of Acies’ assets, including future remittances relating to its portfolio of merchant accounts. Proceeds from loans under this facility have been used to fund general working capital needs, and to repay loans from officers of Acies.

Acies’ borrowings under this agreement during the nine months ended December 31, 2008 totaled $100,000, which amount was borrowed in April 2008. With the April 2008 drawdown on this facility, Acies has fully utilized this capacity and has no remaining availability on this facility. At December 31, 2008, our aggregate remaining principal outstanding from these borrowings was $321,673. The principal repayment schedule for notes payable as of December 31, 2008 was as follows:

Twelve Months Ending December 31:
2009	$	287,349
2010		23,099
2011		11,225
Total	$	321,673

F-6

In June 2008, Acies borrowed $450,000 through the execution of a convertible promissory note with Pinnacle Three Corporation (“Pinnacle”), bearing interest at a rate of 8% per annum, with principal and all accrued interest payable in November 2010. On June 6, 2008, Acies received a conversion letter from Pinnacle requesting conversion of the principal and accrued interest into 22,515,000 shares of Acies common stock at a price of $0.02 per share, per the terms of the Note agreement. On July 17, 2008, Acies issued 22,515,000 shares to Pinnacle in connection with the entry into the Settlement Agreement and Mutual Release between Pinnacle and Acies.

During the months of August and September 2008, Acies borrowed $183,653 through the execution of a convertible promissory note with Pinnacle Three Corporation (“Pinnacle”), bearing interest at a rate of 18% per annum, with principal and all accrued interest payable on September 23, 2009. The Pinnacle note is convertible into shares of Acies’ common stock at an exercise price of $0.02 per share at any time prior to the maturity date.

NOTE 4 – NOTE PAYABLE TO OFFICER

On September 23, 2008, Acies entered into an 18% Convertible Promissory Note in favor of Oleg Firer, Acies’ Chief Executive Officer to evidence the amount of $185,000 owed by Acies to Mr. Firer in connection with various expenses paid by Mr. Firer on Acies’ behalf and reimbursements he is owed dating back to April 2006. Under the terms and conditions of the note, Acies promised to pay to Mr. Firer a principal sum in the amount of $185,000, together with accrued and unpaid interest at the rate of 18% per annum, on September 23, 2009. The note is convertible into shares of Acies’ common stock at an exercise price of $0.02 per share at any time prior to the maturity date. The note is redeemable by Acies by payment of the entire principal and interest outstanding under the note to Mr. Firer. Acies must provide 30 days notice to Mr. Firer prior to redemption.

NOTE 5 - STOCK OPTIONS AND WARRANTS

Acies does not currently have an equity compensation plan in place. Acies has, however, issued options which have not been approved by our shareholders.

During the nine months ended December 31, 2008 and 2007, Acies recognized stock-based compensation expense related to options in the amount of $27,000 and $58,152, respectively. Unrecognized compensation expense on the non-vested portion of the options at December 31, 2008 was approximately $27,000, which is expected to be expensed over a weighted average period of 0.75 years.

No options were granted during the nine months ended December 31, 2008.

Options outstanding and exercisable as of December 31, 2008:

Exercise Price		Number of Shares		Remaining life	Exercisable Number of Shares
$	1.00		2,306,981	1.0 year		2,306,981
$	1.00		100,000	1.2 years		91,667
$	0.25		1,300,000	2.8 years		975,000
			3,706,981			3,373,648

Options outstanding as of December 31, 2008 have $0 intrinsic value.

F-7

Warrants outstanding and exercisable as of December 31, 2008:

Exercise Price		Number of Shares		Remaining life	Exercisable Number of Shares
$	0.25		7,590,000	1.6 years		7,590,000
			7,590,000			7,590,000

There were no warrants issued during the nine months ended December 31, 2008.

NOTE 6 - EQUITY

In September 2007, Acies granted a total of 300,000 shares of restricted common stock to its three independent directors, which vested on June 30, 2008. The market value on the date of issuance was $12,000, which was expensed ratably over the vesting period. For the nine months ended December 31, 2008, Acies recognized $3,667 of stock-based compensation expense in connection with the vested portion of restricted stock awards issued in the aforementioned grant.

In May 2006, Acies granted a total of 300,000 shares of restricted common stock to its three independent directors, which vested one year from the grant date. The market value on the date of issuance was $27,000, which was expensed ratably over the vesting period. During the nine months ended December 30, 2007, Acies recognized a total of $22,500 of stock-based compensation expense in connection with the vested portion of restricted stock awards issued in the aforementioned grant, which are now fully vested.

On July 17, 2008, Acies issued 22,515,000 shares to Pinnacle in exchange for the $450,000 convertible promissory note and accrued interest.

Series A Preferred Stock

On December 15, 2008, Acies filed with the Nevada Secretary of State, a Certificate of Designations of Acies Corporation Establishing the Designations, Preferences, Limitations and Relative Rights of its Series A Preferred Stock (the “Designation”). The Designation provides for the designation of a series of 44,340 shares of Series A Preferred Stock, par value $0.001 per share. The holders of the Preferred Stock are not to be entitled to any liquidation preference. The Designation provides conversion rights whereby upon the effective date of the Reverse Stock Split (defined below under Note 8), each share of preferred stock will automatically convert into shares of Acies’ post-Reverse Stock Split common stock, at the rate of 1,000 post-Reverse Stock Split shares of Acies’ restricted common stock for each 1 share of preferred stock, without any required action by the holder thereof.

The preferred stock is to have the same voting rights as those accruing to the common stock and vote that number of voting shares as are issuable upon conversion of such preferred stock that any holder holds as of the record date of any such vote based on the conversion rate divided by the Reverse Stock Split (to retroactively take into account the Reverse Stock Split). The voting rights of the preferred stock are to be applicable regardless of whether Acies has a sufficient number of authorized but unissued shares of common stock then available to affect an automatic conversion. The holders of the preferred stock are not to be entitled to receive dividends paid on Acies’ common stock and the preferred stock is not to accrue any dividends. Further, the shares of Series A Preferred Stock are not to have or be subject to any redemption rights.

NOTE 7 – INCOME (LOSS) PER SHARE

Stock options and warrants in the aggregate amount of 11,296,981 are not included in the computation of diluted loss per share, as they are anti-dilutive for the six months ended December 31, 2008 and 2007.

NOTE 8 – SUBSEQUENT EVENTS

On February 5, 2009, Acies entered into an Amended and Restated Share Exchange Agreement (the “Exchange Agreement”) with L.A. Digital Post, Inc., a California corporation (“LA Digital”), LADP, LLC, a Delaware limited liability company (“LADP”), which owns all of the outstanding shares of LA Digital, I-Toss Acquisition, Inc., a Delaware corporation (“I-Toss”), and the majority shareholders of I-Toss (the “I-Toss Shareholders”). Acies, I-Toss and the I-Toss Shareholders had previously entered into a Share Exchange Agreement on December 29, 2008 (the “Original Agreement”), which included certain errors which the parties desired to correct and amend, including, but not limited to the fact that it was between Acies, I-Toss and the I-Toss Shareholders instead of Acies, LA Digital and LADP. As such, the Exchange Agreement amended, replaced and superseded in its entirety the Original Agreement, and I-Toss and the I-Toss Shareholders agreed that they will not have any right to take part in the transactions contemplated by the Exchange Agreement.

F-8

The Exchange Agreement memorialized the transactions contemplated by the non-binding Term Sheet entered into on October 20, 2008, except that the Exchange Agreement provided for Acies to purchase shares of LA Digital in lieu of shares of I-Toss. Pursuant to the representations in the Exchange Agreement, LADP owns all of the outstanding shares of LA Digital, and LA Digital holds one wholly-owned subsidiary, LADP New York, LLC, a Delaware limited liability company (“LADPNY”). Upon closing, LADP is to transfer to Acies 100% of the issued and outstanding shares of LA Digital, in exchange for an aggregate of 44,340 shares of Acies’ newly designated Series A Preferred Stock (as described below). The preferred stock is to automatically convert upon the effective date of the Reverse Stock Split (as defined below) into 44,340,000 post-Reverse Stock Split shares of Acies’ common stock, which following the transactions contemplated herein will represent approximately 97% of Acies’ common stock on a fully-diluted basis. The closing of the Exchange Agreement is to occur at a date mutually agreeable to Acies and LADP, subsequent to the satisfaction of the closing conditions (including that LADP is to have obtained the consent of Bank of America to LADP’s entry into the Exchange Agreement and the consummation of the transactions contemplated therein) which date shall in no event be later than March 31, 2009, unless such date is extended in writing by the mutual consent of all parties.

Pursuant to the Exchange Agreement, Acies agreed to file within fifteen (15) days of its receipt of LA Digital’s and LADPNY’s consolidated financial statements and use its best efforts to gain approval of and mail to its shareholders an Information Statement on Schedule 14C or Schedule 14A (the “Information Statement”) prior to closing, to obtain shareholder approval to:

Effect a 1:100 reverse stock split of its issued and outstanding shares of common stock, with all shareholders owning less than 100 shares being rounded up to own 100 shares, and to reauthorize its currently outstanding shares of common and preferred stock (“Reverse Stock Split”);

Effect a name change to a name to be determined by LADP, in its sole discretion (the “Name Change”);

Effect the Spin-Off, as defined and described below; and

Effect such other proposals that Acies may desire in its sole discretion.

Also, pursuant to the Exchange Agreement, immediately after the approval by Acies’ majority shareholders of the Information Statement authorizing the Spin-Off, Acies will effect a spin-off (the “Spin-Off”) of Acies’ wholly owned subsidiary, Acies Inc., a Nevada corporation, and substantially all of Acies’ assets, liabilities, and operations relating to Acies, Inc., from Acies, such that Acies, Inc. will operate as a separate privately held company solely owned by Acies’ current Chief Executive Officer and Director, Oleg Firer (the “Private Company”), the result of which will be that Acies’ sole business focus following the Spin-Off will be the operations of LA Digital. As consideration for Acies agreeing to the Spin-Off, Mr. Firer has agreed to cancel 5,000,000 pre-Reverse Stock Split shares (50,000 post-Reverse Stock Split shares) of Acies’ common stock that he beneficially owns (the “Firer Shares”) and Mr. Firer is to assume the then outstanding amount of Acies’ RBL Capital Group, LLC (“RBL”) loan facility and any liabilities of Acies, Inc. in connection with the Spin-Off.

F-9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF ACIES CORPORATION AND ITS PRINCIPAL SUBSIDIARY, ACIES, INC. (COLLECTIVELY, "THE COMPANY", "WE", “ACIES,” "US" OR "OUR") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO DECEMBER 31, 2008.

HISTORY

The Company was originally incorporated in the State of Nevada on October 11, 2000. On October 1, 2003, the Company changed its name to Atlantic Synergy, Inc. (“Atlantic”). Our principal subsidiary, Acies, Inc., was incorporated in the State of Nevada on April 22, 2004 as GM Merchant Solutions, Inc., and changed its name to Acies, Inc. on June 23, 2004. On June 28, 2004, Acies, Inc. purchased substantially all of the assets of GM Merchant Solutions, Inc., a New York corporation ("GM-NY") and GMS Worldwide, LLC, a New York limited liability company ("GMS-NY"), including cash, accounts receivable, office equipment, furniture, computer hardware and software, and goodwill and other intangible property (including customer lists, leases, and material contracts) in exchange for Acies, Inc. common stock (the “Acies, Inc. Stock”). Mr. Oleg Firer, our current Chief Executive Officer and Director, Mr. Yakov Shimon, our former Vice President of Technology and Data Management, and Mr. Miron Guilliadov, our former Vice President of Sales, had been engaged in the payment processing business through GM-NY and GMS-NY.

On July 2, 2004, Atlantic acquired approximately 99.2% of the issued and outstanding common stock of Acies, Inc. in exchange for approximately 26,150,000 newly issued shares of Atlantic's common stock (the "Exchange"). In connection with, and subsequent to, the Exchange, Atlantic transferred all of its assets held immediately prior to the Exchange, subject to all of Atlantic's then existing liabilities, to Terence Channon, Atlantic's former President and Chief Executive Officer, in consideration for Mr. Channon's cancellation of 4,285,000 shares of Atlantic's common stock and the cancellation of 200,000 shares of Atlantic's common stock held by a third party. The transaction was accounted for as a reverse merger. In connection with this transaction, the Acies, Inc. stock was exchanged for common stock of Atlantic.

In November 2004, Atlantic changed its name to Acies Corporation (“Acies” or the “Company”).

DESCRIPTION OF PRINCIPAL PRODUCTS AND SERVICES

The Company, through its wholly owned subsidiary Acies, Inc., is engaged in the business of providing payment processing solutions to small and medium size merchants across the United States. Through contractual relationships with third parties to whom we outsource the providing of certain services, Acies is able to offer complete solutions for payment processing, whereby we consult with merchants to best determine their hardware and software needs; provide transaction authorization, settlement and clearing services; perform merchant acceptance and underwriting functions; program, deploy and install traditional and next-generation point-of-sale (POS) terminals; assist in the detection of fraudulent transactions; and provide customer and technical support and service on an on-going basis. We are a registered member service provider of JP Morgan Chase Bank and a Strategic Partner of Chase Paymentech Solutions, LLC. Chase Paymentech Solutions, LLC is a joint venture between JPMorgan Chase & Co. and First Data Corp., and is the surviving parent entity of a business combination between Chase Merchant Services, LLC and Paymentech, LP. On May 27, 2008, JPMorgan Chase and First Data Corp. announced that they had agreed to end their joint venture. On November 3, 2008, JPMorgan Chase and First Data Corp completed an ownership transition and ended their joint venture. As part of this transaction, First Data Corp. assumed management of the full-service ISO and Bank unit of the joint venture’s assets and continues to provide services to the joint ventures customers. The Company continues to do business under its legacy agreements, while negotiating new processing agreements with First Data Corp.

The Company’s payment processing services enable merchants to process Credit, Debit, Electronic Benefit Transfer (EBT), Check Conversion, and Gift & Loyalty transactions. Our card processing services enable merchants to accept traditional card-present transactions, including "swipe" and contactless transactions, as well as card-not-present transactions made by Internet or by mail, fax or telephone.

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We outsource certain services to third parties, including the receipt and settlement of funds. In addition, we outsource for a fee certain underwriting and acceptance functions, effectively insuring against risk for entire processed transaction amounts relating to merchant fraud (while retaining the risk related to the fees representing our revenue stream and associated costs). By doing so, we intend to maintain an efficient operating structure which allows us to expand our operations without having to significantly increase fixed costs or retain certain risks associated with acceptance and underwriting of merchant accounts.

We derive the majority of our revenues from fee income related to transaction processing, which is primarily comprised of a percentage of the dollar amount of each transaction processed, as well as a flat fee per transaction. In the event that we have outsourced any of the services provided in the transaction, we remit a portion of the fee income to the third parties that have provided such outsourced services.

We market and sell our services primarily through an indirect sales channel, i.e., through independent sales agents and organizations. In addition, we market services through our direct channel, which is comprised of a limited in-house sales team.

Our cost of revenues is comprised principally of interchange and association fees which are paid to the card-issuing bank and card association, and fees paid to third parties that have provided outsourced services. The fees paid are based upon fixed pricing schedules (certain detailed costs are fixed on a per transaction and/or event basis, while others are fixed as a percentage of the dollar volume of the transaction), which are subject to periodic revision, and are without regard to the pricing charged to the merchant. Fee structures with third parties providing outsourced services are reviewed, renegotiated and/or revised on a periodic basis, and are based on mutually agreed-to expectations relating to, for instance, minimum new business volume placed within specified periods which, if not met, would result in additional charges to be paid by the Company.

Although the Company initiates and maintains the primary relationships with the merchants whose transaction processing results in our revenues, including generally having control over pricing and retaining risk as it relates to the fees comprising our revenue stream, merchants do not have written contracts with the Company, and instead have contractual agreements with third-party processors to whom we outsource, and rely on to perform, certain services on our behalf.

Our fiscal year ends on March 31. References to a fiscal year refer to the calendar year in which such fiscal year ends.

MARKET OVERVIEW

The payment processing industry is an integral part of today's worldwide financial structure. The industry is continually evolving, driven in large part by technological advances. The benefits of card-based payments allow merchants to access a broader universe of consumers, enjoy faster settlement times and reduce transaction errors. By using credit or debit cards, consumers are able to make purchases more conveniently, whether in person, over the Internet, or by mail, fax or telephone, while gaining the benefit of loyalty programs, such as frequent flyer miles or cash back, which are increasingly being offered by credit or debit card issuers.

Consumers are also beginning to use card-based and other electronic payment methods for purchases at an earlier age in life, and increasingly for small dollar amount purchases. Given these advantages of card-based payment systems to both merchants and consumers, favorable demographic trends, and the resulting proliferation of credit and debit card usage, we believe businesses will increasingly seek to accept card-based payment systems in order to remain competitive.

Our management believes that cash transactions are becoming progressively obsolete. The proliferation of bank cards has made the acceptance of bank card payments a virtual necessity for many businesses, regardless of size, in order to remain competitive. In addition, the advent and growth of e-commerce have marked a significant new trend in the way business is being conducted. E-commerce is dependent upon credit and debit cards, as well as other cashless payment processing methods.

The payment processing industry continues to evolve rapidly, based on the application of new technology and changing customer needs. We intend to continue to evolve with the market to provide the necessary technological advances to meet the ever-changing needs of our market place. Traditional players in the industry must quickly adapt to the changing environment or be left behind in the competitive landscape.

COMPETITIVE BUSINESS CONDITIONS

We are committed not only to servicing clients' current processing needs, but also to being amongst the first to make available new technologies that may improve our merchants’ respective competitive positions. We are committed to gaining the expertise and relationships to adopt and implement new technologies that we believe may differentiate our service offerings.

The credit, charge and debit card transaction processing services business is highly competitive. Many of our current and prospective competitors have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, more developed infrastructures, greater name recognition and/or more established relationships in the industry than we have. Because of this our competitors may be able to adopt more aggressive pricing policies than we can, develop and expand their service offerings more rapidly, adapt to new or emerging technologies and changes in customer requirements more quickly, take advantage of acquisitions and other opportunities more readily, achieve greater economies of scale, and devote greater resources to the marketing and sale of their services. Because of the high levels of competition in the industry and the fact that other companies may have greater resources, it may be impossible for us to compete successfully. However, we seek to differentiate the Company through our consultative approach, recommending and implementing the best possible overall payment processing solutions, tailored to merchants’ specific needs.

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TARGET MARKETS

We provide services principally to small and medium-size merchants in retail, restaurant, supermarket, petroleum and hospitality sectors located across the United States. The small merchants we serve typically process on average in excess of $20,000 a month in credit card transactions and have an average transaction value of approximately $50.00 per transaction. These merchants have traditionally been underserved by larger payment processors. As a result, these merchants have historically paid higher transaction fees than larger merchants and have not been provided with tailored solutions and on-going services that larger merchants typically receive from larger processors.

We believe that we have developed significant expertise in industries that we believe present relatively low risk as customers are generally present and the products and/or services are generally delivered at the time the transaction is processed. These industries include “brick and mortar” retailers, hospitality, automotive repair shops, food stores, petroleum distributors and professional service providers. As of March 31, 2008, the end of our last fiscal year, approximately 18% of our merchants were professional service providers, 18% were hospitality merchants, 11% were food stores, 9% were gas stations and petroleum distributors, 8% were automotive sales and repair shops, 6% were apparel stores, 22% were other “brick and mortar” retailers and 8% were other industries.

DISTRIBUTION METHODS

We have adopted what we believe to be an uncomplicated sales strategy enabling us to establish additions to our sales force in a quick, inexpensive manner. We market and sell our services primarily through relationships with independent sales agents and organizations. These agents and organizations act as a non-employee, external sales force in communities throughout the United States.

Our independent sales agents and organizations are principally compensated by receiving on-going monthly residual payments based on a percentage of transaction-based revenues less expenses relating to merchant accounts they have brought to the Company. This stream of residual payments is paid to them indefinitely, assuming that the merchant is still processing through Acies, and that the agent continues to serve the merchant’s needs.

RECENT MATERIAL AGREEMENTS

Share Exchange

On or about February 5, 2009, the Company entered into an Amended and Restated Share Exchange Agreement (the “Exchange Agreement”) with L.A. Digital Post, Inc., a California corporation (“LA Digital”), LADP, LLC, a Delaware limited liability company (“LADP”), which owns all of the outstanding shares of LA Digital, I-Toss Acquisition, Inc., a Delaware corporation (“I-Toss”), and the majority shareholders of I-Toss (the “I-Toss Shareholders”). The Company, I-Toss and the I-Toss Shareholders had previously entered into a Share Exchange Agreement on or about December 29, 2008 (the “Original Agreement”), which included certain errors which the parties desired to correct and amend, including, but not limited to the fact that it was between the Company, I-Toss and the I-Toss Shareholders instead of the Company, LA Digital and LADP. As such, the Exchange Agreement amended, replaced and superseded in its entirety the Original Agreement, and I-Toss and the I-Toss Shareholders agreed that they will not have any right to take part in the transactions contemplated by the Exchange Agreement.

The Exchange Agreement memorialized the transactions contemplated by the non-binding Term Sheet entered into on October 20, 2008 (as reported in Form 8-K filed on October 29, 2008), except that the Exchange Agreement provided for the Company to purchase shares of LA Digital in lieu of shares of I-Toss. Pursuant to the representations in the Exchange Agreement, LADP owns all of the outstanding shares of LA Digital, and LA Digital holds one wholly-owned subsidiary, LADP New York, LLC, a Delaware limited liability company (“LADPNY”). Upon Closing (as defined below), LADP is to transfer to the Company 100% of the issued and outstanding shares of LA Digital, in exchange for an aggregate of 44,340 shares of the Company’s newly designated Series A Preferred Stock (the “Preferred Stock”, as described below). The Preferred Stock is to automatically convert upon the effective date of the Reverse Stock Split (as defined below) into 44,340,000 post-Reverse Stock Split shares of the Company’s common stock, which following the transactions contemplated herein will represent approximately 97% of the Company’s common stock on a fully-diluted basis. The closing of the Exchange Agreement is to occur at a date mutually agreeable to the Company and LADP, subsequent to the satisfaction of the Closing Conditions (as defined in the Exchange Agreement and described below) which date shall in no event be later than March 31, 2009, unless such date is extended in writing by the mutual consent of all parties (“Closing”). Pursuant to the Exchange Agreement, certain “Closing Conditions” are to have occurred, or been waived by the Company in writing, prior to Closing. Such Closing Conditions include but are not limited to the following:

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LADP is to have supplied certain schedules and an officer’s certificate to the Company and the Company is to have had a minimum of ten (10) days to review such schedules;

The certificates representing the ownership of LA Digital are to have been delivered, and the Managers and Members of LADP are to have approved the transactions contemplated by the Exchange Agreement;

LADP is to have obtained the consent of Bank of America to LADP’s entry into the Exchange Agreement and the consummation of the transactions contemplated therein; and

LADP is to have complied with certain other conditions precedent which are described in greater detail in the Exchange Agreement.

Pursuant to the Exchange Agreement, the Company agreed to file within fifteen (15) days of its receipt of LA Digital’s and LADPNY’s consolidated financial statements and use its best efforts to gain approval of and mail to its shareholders an Information Statement on Schedule 14C or Schedule 14A (the “Information Statement”) prior to Closing, to obtain shareholder approval to:

Effect a name change to a name to be determined by LADP, in its sole discretion (the “Name Change”);

Effect the Spin-Off, as defined and described below; and

Effect such other proposals that the Company may desire in its sole discretion.

Upon approval by the Company’s majority shareholders of the Information Statement, which will be prepared not earlier than the issuance of the Bank of America consent described above, the Company is to file a Certificate of Amendment with the Nevada Secretary of State to affect the Reverse Stock Split (the “Certificate of Amendment”).

Also, pursuant to the Exchange Agreement, immediately after the approval by the Company’s majority shareholders of the Information Statement authorizing the Spin-Off, the Company will effect a spin-off (the “Spin-Off”) of the Company’s wholly owned subsidiary, Acies Inc., a Nevada corporation, and substantially all of the Company’s assets, liabilities, and operations relating to Acies, Inc., from the Company, such that Acies, Inc. will operate as a separate privately held company solely owned by the Company’s current Chief Executive Officer and Director, Oleg Firer (the “Private Company”), the result of which will be that the Company’s sole business focus following the Spin-Off will be the operations of LA Digital. As consideration for the Company agreeing to the Spin-Off, Mr. Firer has agreed to cancel 5,000,000 pre-Reverse Stock Split shares (50,000 post-Reverse Stock Split shares) of the Company’s common stock that he beneficially owns (the “Firer Shares”) and Mr. Firer is to assume the then outstanding amount of the Company’s RBL Capital Group, LLC (“RBL”) loan facility and any liabilities of Acies, Inc. in connection with the Spin-Off.

The Company and LADP also agreed that immediately following the Closing, the current officers and Directors of the Company may change, other than Oleg Firer and Theodore Ferrara who are expected to remain as Directors following the Closing and Spin-Off, and that LADP is to have the sole right to appoint new officers and Directors of its sole choosing.

Pursuant to the Exchange Agreement, LADP and LA Digital are to be responsible for and are to pay all reasonable legal, auditing, accounting and other expenses incurred in connection with the Exchange Agreement and the other related transactions described in the Exchange Agreement, including but not limited to the Information Statement and the Spin-Off, regardless of whether the transactions contemplated by the Exchange Agreement are consummated. The payment for such legal, auditing, accounting and other expenses will be paid by LADP or LA Digital by way of a reimbursement to Oleg Firer, the Chief Executive Officer of the Company, for any fees paid personally by Mr. Firer or his assigns or the assumption of the liabilities of the Company relating to the Exchange Agreement and the other related transactions described therein.

Business Summary

LA Digital primarily rents post-production editing equipment consisting of non-linear digital editing systems, data storage devices, video tape recorders and other peripherals. LA Digital also provides technical support services, rents editing rooms (in conjunction with renting editing systems), and on occasion sells equipment.

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LA Digital owns approximately 200 non-linear digital editing systems. LA Digital rents editing systems to its clients on a short-term basis, typically for six to 50 weeks, for use at the client’s site or at one of the 99 editing suites located at LA Digital’s five facilities in Los Angeles and New York. As part of editing system rentals, LA Digital provides custom configuration, full-service installation, and technical support available 24 hours a day, seven days a week. LA Digital’s clients include major film studios, major television networks, cable television networks, and independent production companies.

LA Digital operates a website at www.ladigital.com, which includes information that LA Digital does not desire to be incorporated by reference into this filing.

Competition

The post-production editing equipment rental market is a highly competitive industry centered in Los Angeles and New York, where most of the domestic motion picture and television production is located. A large number of companies offer post-production services with no single provider having a dominant market share. In addition, the major film studios and television networks often have the capability to perform in-house some or all of the services LA Digital offers. LA Digital competes for customers based on reliability, timeliness, quality and price.

Certain Relationships and Related Transactions of the Company and LADP

On or about September 12, 2008, LADP entered into a Term Promissory Note (“Note”) and a Security Agreement with Merchant Capital Advance, LLC (“MCA”). Pursuant to the Note, LA Digital borrowed approximately $3,311,002, from MCA, which bears interest at the rate of 2% per month and is payable on maturity. The outstanding principal balance of this Note together with all accrued but unpaid interest is due and payable in full on April 30, 2009. The Note was guarantied by certain entities and individuals including I-Toss, William Goldstein, the Chief Executive Officer of LA Digital and Marc Bercoon, the Vice President of LA Digital. Pursuant to the Security Agreement securing the repayment of the Note, MCA has a security interest in substantially all of LADP’s assets.

MCA is a wholly-owned subsidiary of Star Capital Management, LLC (“Star Management”). Star Capital Investments, LLC (“Star Capital”) and Star Capital Fund, LLC (“Star Fund”) are, along with MCA, wholly-owned subsidiaries of Star Management. Oleg Firer, the Chief Executive Officer and Director of the Company owns 50% of Star Management, with the remaining 50% interest of Star Management owned by Leon Goldstein, who also owns Pinnacle Three Corporation, which is currently one of the Company’s largest shareholders (30.43%, not including its rights to convert its outstanding Convertible Promissory Note in the amount of $172,653, not including any accrued and unpaid interest, into 8,632,650 shares of our common stock, at the rate of one share for each $0.02 owed) and one of the Company’s largest creditors.

Additionally, Mr. Firer and Mr. Goldstein currently beneficially own 20% of the outstanding membership interests of LADP as a result of their ownership of Star Management, which in turn owns MCA, which holds a 20% interest in LADP. LADP also agreed to grant MCA an additional 15% interest in LADP, bringing MCA’s total interest in LADP up to 35%, in the event the Exchange Agreement described above closes and LA Digital becomes a wholly-owned subsidiary of the Company in consideration for among other things, services MCA rendered to LADP in connection with the negotiation of the Exchange Agreement.

Lease Termination

On or about November 10, 2008, the Company entered into a Lease Termination Agreement with CRP/Capstone 14 W Property Owner, L.L.C., a Delaware limited liability company (“CRP”) and the landlord and owner of the Company’s office space at 14 Wall Street, New York, New York. Pursuant to the Lease Termination Agreement the Company and CRP agreed to terminate the lease agreement for the Company’s office space at 14 Wall Street, New York, New York. The Company entered into the lease agreement on June 4, 2004, and the Company vacated the premises on September 30, 2008. The Lease Termination Agreement has an effective date of September 30, 2008. As consideration for allowing termination of the lease agreement, the Company agreed to pay CRP a total of $12,500 prior to November 28, 2008, which amount has not been paid to date, and relinquish all rights to any security deposits held by CRP. The Lease Termination Agreement also provides a mutual release of liability provision whereby the Company and CRP agreed to release and discharge each other from all claims and liability arising out of or in connection with the lease agreement.

Series A Preferred Stock

On December 15, 2008, the Company filed with the Nevada Secretary of State, a Certificate of Designations of Acies Corporation Establishing the Designations, Preferences, Limitations and Relative Rights of Its Series A Preferred Stock (the “Designation”). The Designation provides for the issuance of a series of 44,340 shares of Series A Preferred Stock, par value $0.001 per share (the “Preferred Stock”). The holders of the Preferred Stock are not to be entitled to any liquidation preference. The Designation provides “Conversion Rights” whereby upon the Effective Date (as defined below) of the Reverse Stock Split, each share of Preferred Stock will automatically convert into shares of the Company’s post-Reverse Stock Split common stock (the “Automatic Conversion”), at the rate of 1,000 post-Reverse Stock Split shares of the Company’s restricted common stock for each 1 share of Preferred Stock (the “Conversion Rate”), without any required action by the holder thereof. “Effective Date” is to mean the later to occur of (a) the date the Certificate of Amendment becomes effective with the Secretary of State of Nevada; (b) the date the Reverse Stock Split is effected with the Company’s Transfer Agent; and (c) the date the Reverse Stock Split and Certificate of Amendment is effected with the Financial Industry Regulatory Authority (“FINRA”).

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The Designation also provides that the Preferred Stock is to have the same voting rights as those accruing to the common stock and vote that number of voting shares as are issuable upon conversion of such Preferred Stock that any holder holds as of the record date of any such vote based on the Conversion Rate divided by the Reverse Stock Split (to retroactively take into account the Reverse Stock Split). The voting rights of the Preferred Stock are to be applicable regardless of whether the Company has a sufficient number of authorized but unissued shares of common stock then available to affect an Automatic Conversion. The holders of the Preferred Stock are not to be entitled to receive dividends paid on the Company’s common stock and the Preferred Stock is not to accrue any dividends. Further, the shares of Series A Preferred Stock are not to have or be subject to any redemption rights. Also, the holders of Preferred Stock and holders of common stock are not to be entitled to any preemptive, subscription or similar rights in respect to any securities of the Company.

The Designation also contains “Protective Provisions” whereby, so long as any shares of the Preferred Stock are outstanding, the Company is not to, without first obtaining the approval of the holders of a majority of the then outstanding shares of Preferred Stock voting together as a class, do any of the following:

Increase or decrease (other than by conversion) the total number of authorized shares of the Preferred Stock;

Effect an exchange, reclassification, or cancellation of all or a part of the Preferred Stock, including a reverse stock split (other than the Reverse Stock Split), but excluding a stock split, so long as the Preferred Stock’s Conversion Rights are not diminished in connection therewith;

Effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of the Preferred Stock (other than as provided in the Exchange Agreement); or

Alter or change the rights, preferences or privileges of the shares of the Preferred Stock so as to affect adversely the shares of such series.

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PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

Moving forward, we anticipate finalizing the transactions contemplated by the Exchange Agreement with LADP, as described above. Assuming the Closing Conditions described above are met, we anticipate filing an Information Statement with the Securities and Exchange Commission, pursuant to the Exchange Agreement, to receive shareholder approval to effect the Reverse Stock Split, the Name Change, the Spin-Off and such other proposals that the Company may desire in its sole discretion, as described above. Further, the Company will effect the Spin-Off, immediately after it receives shareholder approval. Upon the closing of the Exchange Agreement, the Company’s business focus and operations will change to those of LA Digital, which business focus and which risks associated with such business focus are described in greater detail in the Company’s current report on Form 8-K, filed with the Securities and Exchange Commission on February 13, 2009. Until such time as the Spin-Off is effected, of which there can be no assurances, we will continue to engage in the business of providing payment processing solutions to small and medium size merchants across the United States, and will use our best efforts to expand our client base and/or improve the Company’s profitably, although as described above, assuming the Exchange Agreement closes, of which there can be no assurance, our most significant operations will change to those of LADP.

We have incurred losses and experienced negative operating cash flow each year since we have become a public reporting company. For the nine months ended December 31, 2008, we had a net loss of $405,624, and had an accumulated deficit of $6,521,256 and negative working capital of $744,525 as of December 31, 2008.

The Company received a going concern opinion from its auditors on its audited financial statements for fiscal 2008. Due to our lack of profitability and our negative working capital, there is "substantial doubt" about our ability to continue as a going concern. This substantial doubt may limit our ability to access certain types of financing, or may prevent us from obtaining financing on acceptable terms.

In the event the Exchange Agreement does not close, we anticipate needing to raise additional capital in the short term to continue our operations in addition to the previous notes we sold in August 2008. We anticipate the need for approximately $2,000,000 of additional capital to support our operations for the next 12 months. We may attempt to sell debt and/or equity securities in the future to raise additional funds to continue our business operations until the Exchange Agreement closes, if ever, which funds may not be available on favorable terms, if at all. If we are unable to raise additional funding in the future, we may be forced to curtail our business operations, change our business focus, cease our periodic filings, sell our assets, file for bankruptcy protection or dissolve the Company.

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COMPARISON OF OPERATING RESULTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2008, COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2007

Revenues decreased $1,683,259 or 50.6% to $1,640,085 for the three months ended December 31, 2008, as compared to revenues of $3,323,344 for the three months ended December 31, 2007. The decrease in revenues was principally due to lower then expected credit card transactions, primarily as a consequence of the downturn in the economy, which resulted in lower merchant processing fees from our merchant bank card processing.

Cost of revenues decreased $1,436,439 or 49.1% to $1,486,286 for the three months ended December 31, 2008, as compared to cost of revenues of $2,922,725 for the three months ended December 31, 2007. The decrease in cost of revenues was principally attributable to the decrease in merchant processing costs that resulted from a decrease in merchant processing revenues.

Gross margin decreased $246,720 or 61.6% to $153,899 for the three months ended December 31, 2008, as compared to gross margin of $400,619 for the three months ended December 31, 2007.

Cost of revenues as a percentage of revenues were 85.3% for the three months ended December 31, 2008, compared to 87.9% for the nine months ended December 31, 2007, a decrease in cost of revenues as a percentage of revenues of 2.6% from the prior period.

General, administrative and selling ("G&A") expense decreased $329,557 or 77.1% to $97,778 for the three months ended December 31, 2008, as compared to G&A expense of $427,335 for the three months ended December 31, 2007. The decrease in G&A expense was principally attributable to decreased personnel costs and reversal of prior rent expense accruals of approximately $65,000 related to the Company’s prior office space, which were forgiven by the Company’s prior landlord in connection with the entry into the November 10, 2008, Lease Termination Agreement.

During the three months ended December 31, 2008, we incurred interest expense of $21,739 related to our notes payable compared to $45,049 for three month period of the prior year, a decrease of $23,310 or 51.7% from the prior period. The decrease in interest expense was due to a reduction in the outstanding balance of the RBL loans (as defined below) for the three months ended December 31, 2008, compared to the three months ended December 31, 2007, which in turn decreased overall interest expense for the three months ended December 31, 2008, compared to the three months ended December 31, 2007.

We had net income of $34,382 for the three months ended December 31, 2008, as compared to a net loss of $71,765 for the three months ended December 31, 2007, an increase in net income of $106,147.from the prior period.

FOR THE NINE MONTHS ENDED DECEMBER 31, 2008, COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 2007

We had revenues of $7,289,631 for the nine months ended December 31, 2008, compared to revenues of $9,968,838 for the nine months ended December 31, 2007, a decrease in revenues from the prior period of $2,679,207 or 26.9%. The decrease in revenues was principally due to lower than expected credit card transactions primarily as a consequence of the downturn in the economy which resulted in lower merchant processing fees from our merchant bank card processing. We anticipate our revenues being lower for fiscal 2009 versus fiscal 2008 due to the overall downturn in the economy and reduced consumer spending, which in turn reduces the merchant processing fees we receive.

We had cost of revenues relating to direct production costs of $6,508,261 for the nine months ended December 31, 2008, compared to cost of revenues relating to direct production costs of $8,788,530 for the nine months ended December 31, 2007, a decrease in cost of revenues from the prior period of $2,280,269 or 25.9%. The decrease in cost of revenues was principally attributable to the decrease in merchant processing costs that resulted from a decrease in merchant processing revenues.

Cost of revenues as a percentage of revenues were 89.3% for the nine months ended December 31, 2008, compared to 88.2% for the nine months ended December 31, 2007, an increase in cost of revenues as a percentage of revenues of 1.1% from the prior period.

We had gross margin of $781,370 for the nine months ended December 31, 2008, compared to gross margin of $1,180,308 for the nine months ended December 31, 2007, a decrease in gross margin of $398,938 or 33.8% from the prior period attributable to decreased revenues.

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We had general, administrative and selling expenses of $1,090,521 for the nine months ended December 31, 2008, compared to general, administrative and selling expenses of $1,555,075 for the nine months ended December 31, 2007, a decrease in general, administrative and selling expenses of $464,554 or 29.9% from the prior period. The decrease in general, administrative and selling expenses was primarily the result of decreased personnel costs, professional fees, rent and travel expenses and reversal of prior rent expense accruals of approximately $65,000 related to the Company’s prior office space, which were forgiven by the Company’s prior landlord in connection with the entry into the November 10, 2008, Lease Termination Agreement, during the nine months ended December 31, 2008, compared to the nine months ended December 31, 2007.

We had a loss from operations of $309,151 for the nine months ended December 31, 2008, compared to a loss from operations of $374,767 for the nine months ended December 31, 2007, a decrease in loss from operations of $65,616 or 17.5% from the prior period. The decrease in loss from operations was mainly attributable to the $398,938 or 33.8% decrease in gross profit for the nine months ended December 31, 2008 compared to the nine months ended December 31, 2007, offset by the $464,554 or 29.9% decrease in general, administrative and selling expenses.

We had interest expense for the nine months ended December 31, 2008, of $96,473, compared to interest expense of $112,923 for the nine months ended December 31, 2007, a decrease in interest expense of $16,450 or 14.6% from the prior period. The decrease in interest expense was mainly attributable to the maturity of some of the drawdowns within the Loan and Security Agreement dated October 31, 2006 with RBL, as described below.

We had a net loss of $405,624 for the nine months ended December 31, 2008, compared to $487,690 for the nine months ended December 31, 2007, a decrease in net loss of $82,066 or 16.8% from the prior period.

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LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2008, we had total current assets of $615,267, consisting solely of accounts receivable of $615,267, and total current liabilities of $1,359,792, consisting of notes payable – current portion of $287,349, accounts payable and accrued expenses of $961,235, deferred revenue of $92,398 and merchant equipment deposits of $18,810, resulting in negative working capital of $744,525. This compares to negative working capital of $1,134,602 at March 31, 2008.

We had total assets as of December 31, 2008 of $665,678, which included the total current assets of $615,267, other assets and deposits of $32,281, fixed assets of $13,715 and merchant terminal equipment of $4,415.

We had total liabilities as of December 31, 2008 of $1,762,769, which included total current liabilities of $1,359,792, and long term notes payable to Oleg Firer of $185,000, long term notes payable to Pinnacle Three Corporation of $183,653, and long term portion of other notes payable of $34,324.

We had a total accumulated deficit of $6,521,256 as of December 31, 2008. The Company believes that the existing financing and expected earnings will not meet its current working capital and debt service requirements for the next twelve months, assuming the Exchange with I-Toss is not effected. These issues raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets or the amount of liabilities that might result should the Company be unable to continue as a going concern.

To alleviate the effects of our previously reported working capital deficits and negative cash flows from operations, the Company succeeded in securing financing on October 31, 2006, when we entered into a Loan and Security Agreement (the “Loan Agreement”) with RBL Capital Group, LLC (“RBL”). The Loan Agreement provided a term loan facility with a maximum borrowing of $2,000,000. With the April 2008 drawdown on this facility, the Company has fully utilized this capacity and has no remaining availability on this facility.

As of December 31, 2008, the aggregate amount outstanding from our RBL facility borrowings was $321,672. The amounts borrowed from RBL bear interest at varying interest rates from between 14.18% and 17.15% per annum.

In June 2008, the Company borrowed $450,000 through the execution of a Convertible Promissory Note (the “Note”), with Pinnacle Three Corporation (“Pinnacle”), bearing interest at a rate of 8% per annum, with principal and all accrued interest payable in November 2010. On June 6, 2008, the Company received a conversion letter from Pinnacle requesting conversion of the principal and accrued interest into 22,515,000 shares of Acies common stock at a price of $0.02 per share, per the terms of the Note agreement. On July 17, 2008, the Company issued 22,515,000 shares to Pinnacle in connection with the entry into a Settlement Agreement and Mutual Release between Pinnacle and the Company.

On September 23, 2008, the Company entered into an 18% Convertible Promissory Note in favor of Pinnacle for $172,653 to evidence loans advanced to the Company by Pinnacle during the months of August and September 2008. Together with principal and all accrued interest, the note is due and payable on September 23, 2009. The note is convertible into shares of the Company’s common stock at an exercise price of $0.02 per share at any time prior to the maturity date. The balance of this note, not including any accrued and unpaid interest as of December 31, 2008 was $172,653.

On September 23, 2008, the Company entered into an 18% Convertible Promissory Note in favor of Mr. Oleg Firer, the Company’s Chief Executive Officer and Director of the Company, to evidence the amount of $185,000 owed by the Company to Mr. Firer in connection with various expenses paid by Mr. Firer on the Company’s behalf and reimbursements he is owed dating back to April 2006. The note is due and payable together with accrued and unpaid interest on September 23, 2009, and is convertible into shares of the Company’s common stock at an exercise price of $0.02 per share at any time prior to the maturity date. The balance of this note, not including accrued and unpaid interest as of December 31, 2008 was $185,000.

The Company’s recent borrowing will only alleviate our short-term capital needs. In the event the Exchange Agreement with LADP does not close, Acies will need to secure additional capital through debt and/or equity financing, of which there can be no assurance to continue its business operations. If the Exchange Agreement with LADP closes and all the related transactions, described above under “Share Exchange Agreement,” are finalized, the Company would be able to transfer the remaining portion of debt under the RBL Loan Agreement out of the Company, assuming such transfer is approved by RBL. We do not, however, have any commitments or identified sources of additional capital from third parties or from our officers, directors or significant shareholders. There is no assurance that additional financing will be available on favorable terms, if at all, or that the Exchange Agreement with LADP will ever close. If we are unable to raise such additional financing or close the Exchange Agreement with LADP, it would have a materially adverse effect upon our operations and our ability to fully implement our business plan, which would limit our ability to continue as an on-going business. Assuming the Exchange Agreement with LADP does not close, the Company estimates that it will need approximately $2,000,000 of additional financing to continue its business operations, including administrative and other costs, for the next 12 months.

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We had net cash used in operating activities of $94,037 for the nine months ended December 31, 2008, which was mainly due to $405,624 of net loss, $213,745 of decrease in accounts payable and accrued expenses and $3,835 of decrease in deferred revenue, offset by a $16,295 increase in other current assets, $35,640 of increase in other assets and deposits, $30,667 of stock-based compensation, $48,821 of depreciation expense and $468,438 of decrease in accounts receivable.

We had $52,639 of net cash provided by financing activities for the nine months ended December 31, 2008, which represented $733,653 in proceeds from notes payable, which included $450,000 received from Pinnacle Three Corporation, $100,000 received under the RBL facility and $183,653 representing additional amounts received from Pinnacle Three Corporation and memorialized by the note described above, offset by $681,014 of repayment of notes payable.

Cash Requirements

Our business is such that our revenues are generally recurring. Once we add a new account, which generally entails up-front expenditures, whether it be salaries for direct (i.e., Acies-employed) salespersons, or an investment in merchant terminal equipment, we typically receive revenue relating to that account for as long as the merchant is our customer. If we employ a strategy of utilizing independent sales agents and organizations, who are not salaried and are paid on a performance-based basis, the up-front costs are even less; however; commissions payable to these independent sales agents are higher.

Our strategy is flexible, whereby we attempt to employ funds that are available to us to profitably grow the business as rapidly as possible, albeit in a controlled fashion, with an eye toward maintaining customer service levels and minimizing risk in order to retain merchants and have a long-term revenue stream. Assuming the Exchange Agreement with LADP does not close, funding may be necessary to grow the business significantly, especially through direct sales channels which would require the addition of salaried employees. In the absence of such funding, we believe that we can continue to grow at modest levels, relying more heavily on the indirect (i.e., independent sales agent) channel.

Most of our expenses are variable and are a function of our revenue stream, while other expenses are of a more fixed nature, but are still controllable. Moreover, our fixed expenses which reflect the on-going cost of our infrastructure would not need to be increased significantly as our revenue base increases. We estimate that over the next twelve months, to maintain a minimal rate of growth, we would have corporate operating expenses on a cash basis, excluding our cost of revenues which is variable, of approximately $2,000,000, assuming the Exchange Agreement with LADP does not close. This would include our personnel costs, rent, professional fees, insurance, utilities and other office expenses. At our current revenue growth rate, assuming no improvement over historical margins, we believe that operating cash flow would not be sufficient to cover our expenditures, unless we are able to obtain additional financing.

We have no current commitment from our officers and Directors or any of our shareholders to supplement our operations or provide us with financing in the future. If we are unable to close the Exchange Agreement with LADP or raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to close the transaction with LADP and/or continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results.

In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, including the shares to be issued pursuant to the Exchange Agreement with LADP, if accomplished, will result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

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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 policy affects our more significant estimates and judgments used in the preparation of our financial statements:

Revenue is recognized on a gross basis (i.e., prior to deducting expenses paid to third parties for outsourced processing and settlement services), with such determination based on Acies’ review and interpretation of current accounting promulgations, including but not limited to Emerging Issues Task Force Consensus 99-19, “Reporting Revenue Gross as Principal versus Net as an Agent” (“EITF 99-19”). We believe that most of the indicators of gross revenue reporting discussed in EITF 99-19 support our revenue recognition policy. Factors which were critical in our determination included, but were not limited to, the extent to which Acies has latitude in establishing price, credit risk and discretion in supplier selection.

Acies has very broad latitude in negotiating and setting the pricing paid by the merchants for electronic transactions, including all fees relating to merchants’ acceptance of credit and debit card payments. Pricing generally is unique to each merchant, and is principally based upon the merchant’s tailored needs, competitive pricing issues and a satisfactory profit margin for Acies. Although pricing varies by merchant, Acies’ costs relating to these transactions, paid to third-party processors and others to whom Acies outsources certain functions, are generally fixed and are based upon predetermined cost schedules which apply regardless of the pricing agreed to by the merchant. Acies control of pricing is critical to the determination of profitability as it relates to any given merchant.

Acies has credit risk relating to the revenue it recognizes. Should there be a problem with any given transaction, or with fraudulent conduct by any given merchant, Acies is not generally liable for the underlying value of a transaction (i.e., the amount paid by a consumer of a product or service paid for by credit or debit card). We are, however, generally liable for the transaction costs (as described above), even if we do not receive the revenue relating to the transaction.

Although Acies is generally not a formal party to a merchant agreement, we do have a choice of third-party processors and servicers to whom we may outsource certain on-going functions relating to any given merchant account and its related transactions. In most cases, we have the contractual authority with our third-party processors to switch a merchant account from one third-party processor to another, assuming that the merchant agrees to do so.

The above factors, along with Acies being the primary point of contact in the acquiring and on-going servicing of its merchants, as well as the full spectrum of services that Acies provides to its merchants, have led Acies to the judgment that gross revenue reporting is the most appropriate accounting treatment. In addition, we believe that based on our business model, our investors and other readers of our financial statements benefit greatly from this presentation as it exhibits the impact on profitability of the Company’s pricing policies. Stock based Compensation. We account for share-based payments under SFAS 123R, which requires that share-based payments be reflected as an expense based upon the grant-date fair value of those awards. The expense is recognized over the remaining vesting periods of the awards. The Company estimates the fair value of these awards, including stock options and warrants, using the Black-Scholes model. This model requires management to make certain estimates in the assumptions used in this model, including the expected term the award will be held, volatility of the underlying common stock, discount rate and forfeiture rate. We develop our assumptions based on our past historical trends as well as consider changes for future expectations.

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Recently issued accounting pronouncements. The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and acting Chief Financial Officer, Oleg Firer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934, as amended) as of December 31, 2008. Based upon this evaluation, the Chief Executive Officer, who is also the acting Chief Financial Officer has concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2008, because of the material weakness in internal control over financial reporting described below.

The matters involving internal controls and procedures that the Company's management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) inadequate segregation of duties consistent with control objectives; (2) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company's management in connection with the financial statements as of September 30, 2008.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules13a-15 or 15d-15 under the Exchange Act that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 4, 2006, the Company received a complaint filed in the Supreme Court of the State of New York, County of New York, by a merchant, which named as co-defendants Acies, several of our strategic partners, and a third-party bank. The dispute relates to bank accounts used by the merchant to process credit and debit card transactions. The Company believes that the probability of any material loss is remote, especially when considering that we are contractually indemnified by a partner for the type of loss which would result from such a claim.

Other than the above mentioned dispute, we are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

ITEM 1A. RISK FACTORS

An investment in our common stock is highly speculative, and should only be made by persons who can afford to lose their entire investment in us. You should carefully consider the following risk factors and other information in this quarterly report before deciding to become a holder of our common stock. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent. Additionally, in the event the Exchange Agreement with LADP (described above) closes and our business focus changes to that of LA Digital, we will be subject to certain other risk factors, as well as those below.

RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS

IF THE SHARE EXCHANGE AGREEMENT WITH LADP CLOSES, THE COMPANY WILL CHANGE ITS OPERATIONS TO THOSE OF LA DIGITAL AND EFFECT A SPIN-OFF OF ITS OPERATIONS AS A PAYMENT SERVICES COMPANY, WHICH NEW OPERATIONS MAY NOT BE SUCCESSFUL AND/OR MAY CAUSE THE COMPANY TO FAIL.

On or about February 5, 2009, the Company entered into an Amended and Restated Share Exchange Agreement (the “Exchange Agreement”) with LADP, LLC, a Delaware limited liability company (“LADP”), L.A. Digital Post, Inc., a California corporation (“LA Digital”) I-Toss Acquisition, Inc., a Delaware corporation (“I-Toss”), and the shareholders of I-Toss owning 100% of its outstanding shares, as described above. Pursuant to and in connection with the Exchange Agreement, the Company is to acquire the outstanding shares of LA Digital and change its operations to those of LA Digital and effect a spin-off (the “Spin Off”) of Acies, Inc., a Nevada corporation and the Company’s wholly owned subsidiary, to a stand alone private company solely owned by the Company’s current Chief Executive Officer and Director, Oleg Firer. The Spin-Off will effectively spin off the Company’s current operations as a payment services company (the “Acies Operations”) and the Company’s sole business focus following the Spin Off will be the operations of LADP. The Company is to effect the Spin-Off immediately after it obtains stockholder approval of an Information Statement on Schedule 14C or Schedule 14A. As consideration for the Company agreeing to the Spin-Off, Mr. Firer will cancel 5,000,000 pre-Reverse Stock Split shares of common stock of the Company that he currently beneficially owns and Mr. Firer and/or Acies, Inc. will assume the then outstanding amount of the Company’s RBL Capital Group, LLC (“RBL”) loan facility. Further, the Company will agree to relinquish any and all rights to ownership of the Acies Operations and any associated assets in consideration for the Spin Off and the assumption by Acies, Inc., of the RBL loan facility. Upon closing of the Spin-Off, the Company will no longer operate as a payments services company and will solely focus on the current business and operations of LADP. As such, the Spin-Off will have a material effect on the business, revenues, expenses, assets, liabilities, and cash flows of the Company. While the Spin-Off will not change stockholder’s ownership interest in the Company, stockholders should be aware that the Company they own an interest in will have materially changed, including the operations of the Company, the officers and Directors and the business focus.

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IF THE SHARE EXCHANGE AGREEMENT WITH LADP CLOSES, THE COMPANY’S MANAGEMENT WILL CHANGE.

In the event the transactions contemplated by the Exchange Agreement do occur, our officers and Directors will change and new individuals will be appointed as officers and Directors of the Company. Those individuals may have more or less experience with public companies and public company reporting obligations. As a result, we can provide no assurances that such new individuals will make favorable choices for the Company’s shareholders, will lead the Company towards profitable operations or will otherwise make smart business decisions. If such individuals do not make choices in the Company’s best interest and/or make poor decisions regarding the Company’s operations, the value of the Company’s securities could decline in value and/or become worthless.

THE CONVERSION OF THE PREFERRED STOCK UPON THE CLOSING OF THE EXCHANGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREIN MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND WILL CAUSE SUBSTANTIAL DILUTION TO OUR THEN SHAREHOLDERS.

Assuming the closing of the Exchange Agreement, we will issue an aggregate of 44,340 shares of the Company’s newly designated Series A Preferred Stock, which will convert upon the effective date of the Reverse Stock Split (as defined above) into 44,340,000 post-Reverse Stock Split shares of the Company’s common stock, which following the transactions contemplated herein will represent approximately 97% of the Company’s common stock on a fully-diluted basis. This conversion will cause substantial dilution to our existing shareholders. Additionally, the Reverse Stock Split and the sale of these shares may adversely affect the market price, of our common stock.

WE HAVE HAD LOSSES SINCE WE HAVE BECOME A PUBLIC REPORTING COMPANY.

We have incurred losses and experienced negative operating cash flow each year since we have become a public reporting company in April 2002. For our fiscal years ended March 31, 2008 and March 31, 2007, we had a net loss of $668,140 and $1,130,717, respectively, and we have had negative operating cash flow of $453,081 and $474,181, respectively for such periods. We had a net loss of $405,624 and negative operating cash flows of $94,037 for the nine months ended December 31, 2008. We had a total accumulated deficit of $6,521,256 and negative working capital of $744,525 as of December 31, 2008.

Continued losses may require us to seek additional debt or equity financing. If debt financing is available and obtained, our interest expense may increase and we may be subject to the risk of default, depending on the terms of such financing. If equity financing is available and obtained it may result in our shareholders experiencing significant dilution. If such financing is unavailable we may be required to restrict growth by decreasing future marketing expenditures and/or investment in our infrastructure.

DEPENDENCY ON ADDITIONAL FINANCING.

As mentioned above, we have experienced negative operating cash flow and there is no assurance that we will have positive operating cash flow in the future. We have relied upon borrowings under the Loan and Security Agreement described in detail in the section “Management’s Discussion and Analysis” and in Note 2 to the Unaudited Consolidated Financial Statements in order to satisfy our liquidity needs. The borrowing capacity afforded us under this agreement has been fully utilized based on the eighteen months term of the Loan and Security Agreement. The Company needs to obtain additional financing to maintain liquidity and continue its business operations over the next twelve months, assuming the Exchange Agreement with LADP does not close.

OUR AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2008 INCLUDE A GOING CONCERN OPINION FROM OUR INDEPENDENT AUDITORS.

The Company received a going concern opinion from its auditors on its financial statements for fiscal 2008. Our auditors have stated that due to our lack of profitability and our negative working capital, there is "substantial doubt" about our ability to continue as a going concern. This substantial doubt may limit our ability to access certain types of financing, or may prevent us from obtaining financing on acceptable terms.

MAJORITY VOTING CONTROL OVER THE COMPANY IS IN THE HANDS OF ONLY TWO SHAREHOLDERS.

Voting together, Pinnacle Three Corporation, which holds 22,515,000 or 30% of our outstanding shares of common stock and our CEO, Oleg Firer, who can vote 27,530,009 shares of common stock representing 37.2% of the outstanding shares of common stock have voting control over the Company. Mr. Firer holds proxies for six (6) different stockholders of the Company, holding an aggregate of 17,895,723 shares of the Company’s common stock. The stockholders that entered into proxy agreements with Mr. Firer include Rite Holdings, Inc (7,190,331 shares), Yakov Shimon (8,932,510 shares), Leonid Shimon (266,907 shares), Arkady Khavulya (1,423,175 shares), Stanislav Pavlenko (7,800 shares), and G.R. Woitzik (75,000 shares). Mr. Firer also personally holds voting rights to 8,949,910 shares of common stock which he personally beneficially owns. Pinnacle Three Corporation holds 22,515,000 shares of our common stock. In addition, both Mr. Firer and Pinnacle Three Corporation hold convertible promissory notes in the amounts of $185,000 and $172,653, respectively in September 2008, which notes are convertible at the option of such holders into approximately 9,250,000 and 8,632,650 shares of our common stock, respectively, at a conversion price of $0.02 per share. As a result, Pinnacle Three Corporation and Mr. Firer will exercise control in determining the outcome of all corporate transactions or other matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of Pinnacle Three Corporation and Mr. Firer, who are unrelated and have not agreed to vote together on any shareholder matters, may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other shareholders. Further, to date, Mr. Firer and Pinnacle Three Corporation have both indicated that they will vote for all of the actions in the Information Statement that are to be filed in connection with the Exchange Agreement (as described above under “Material Agreements”), including the Spin-Off.

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WE DEPEND ON VISA AND MASTERCARD REGISTRATION AND FINANCIAL INSTITUTION SPONSORS AND WE MUST COMPLY WITH THEIR STANDARDS TO MAINTAIN REGISTRATION. THE TERMINATION OF OUR REGISTRATION COULD REQUIRE US TO STOP PROVIDING PROCESSING SERVICES ALTOGETHER.

Our designation with Visa and MasterCard as a member service provider is dependent upon the sponsorship of member clearing banks, including JP Morgan Chase, and our continuing adherence to the standards of the Visa and MasterCard credit card associations. In the event we fail to comply with these standards, Visa or MasterCard could suspend or terminate our designation as a member service provider. If these sponsorships are terminated and we are unable to secure another bank sponsor, we will not be able to process bankcard transactions. Because of the fact that the vast majority of the transactions we process involve Visa or MasterCard, the termination of our registration or any changes in the Visa or MasterCard rules that would impair our registration could require us to stop providing processing services altogether. This would severely impact our revenues, and with that the value of our Company.

WE DEPEND ON SALES AGENTS THAT DO NOT SERVE US EXCLUSIVELY AND HAVE THE RIGHT TO REFER MERCHANTS TO OUR COMPETITORS.

We rely primarily on the efforts of independent sales agents ("Sales Agents") to market our services to merchants seeking to establish an account with a payment processor in order to accept Credit, Debit, Electronic Benefit Transfer (EBT), Check Conversion and Gift & Loyalty transactions. Sales Agents are classified as either individuals or companies that seek to introduce both newly established and existing small, medium and large businesses including retailers, restaurants, supermarkets, petroleum stations and e-commerce retailers. Most of the Sales Agents that refer merchants to us are non-exclusive to us and therefore most of them have the right to refer merchants to other service providers. Our failure to maintain our relationships with our existing and future Sales Agents, and to recruit and establish new relationships with other Sales Agents, could adversely affect our revenues and growth, and increase our merchant attrition. This would lead to an increase in cost of revenues for us which would adversely impact net income.

INCREASES IN INTERCHANGE RATES MAY ADVERSELY AFFECT OUR PROFITABILITY.

Visa and MasterCard routinely increase their respective interchange rates each year. Interchange rates are also known as discount rates that are charged for transactions processed through Visa and MasterCard. Although we historically have reflected these increases in our pricing to merchants, there can be no assurance that merchants will continue to assume the entire impact of future increases or that transaction processing volumes will not decrease and merchant attrition increase as a result of these increases. If interchange rates increase to a point where it becomes unprofitable for us to enable merchants to accept Visa and MasterCard it would cause an increase in our cost of revenues and potentially make it unprofitable for us to continue without a change in our business plan.

INCREASES IN PROCESSING COSTS MAY ADVERSELY AFFECT OUR PROFITABILITY.

We are subject to certain contractual volume obligations that if not met, will cause our processing costs to increase and may therefore adversely affect our ability to attain and retain new and existing merchants. More information about our contractual obligations is located in the section of “Management’s Discussion and Analysis” entitled "Liquidity and Capital Resources."

HIGH LEVELS OF COMPETITION MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MAINTAINING CURRENT REVENUE LEVELS IS DEPENDENT UPON FACTORS IMPACTING THE PETROLEUM INDUSTRY.

Over 40% of the Company’s revenue is derived from merchants in the petroleum industry. The Company therefore has a risk of revenue being adversely impacted by significant decreases in gasoline prices, increases in merchant strategies to have more consumers pay in cash, or other negative factors which adversely affect the petroleum industry.

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INCREASED MERCHANT ATTRITION MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We experience attrition in our merchant base in the ordinary course of business resulting from several factors, including business closures and losses to competitors. Despite our retention efforts, increased merchant attrition may have a material adverse effect on our financial condition and results of operations. If we are unable to gain merchants to replace the ones we lose, we may be forced to change, curtail or abandon our business plan.

OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL FLUCTUATIONS IN CONSUMER SPENDING PATTERNS.

We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenues as a result of consumer spending patterns. Historically, revenues have been weaker during the first two quarters of the calendar year and stronger during the third and fourth quarters. If, for any reason, our revenues are below seasonal norms during the third or fourth quarter, our net income could be lower than expected. This could lead to a decrease in the value of our common stock.

WE MAY BECOME SUBJECT TO CERTAIN STATE TAXES FOR CERTAIN PORTIONS OF OUR FEES CHARGED TO MERCHANTS.

We, like other transaction processing companies, may be subject to state taxation of certain portions of our fees charged to merchants for our services. Application of this tax is an emerging issue in the transaction processing industry and the states have not yet adopted uniform guidelines. If in the future we are required to pay such taxes and are not able to pass this expense on to our merchant customers, our financial results could be adversely affected.

WE MAY BE SUBJECT TO LIABILITY DUE TO SECURITY RISKS BOTH TO USERS OF OUR MERCHANT SERVICES AND TO THE UNINTERRUPTED OPERATION OF OUR SYSTEMS.

Security and privacy concerns of users of electronic commerce such as our merchant services may inhibit the growth of the Internet and other online services as a means of conducting commercial transactions. We rely on secure socket layer technology, public key cryptography and digital certificate technology to provide the security and authentication necessary for secure transmission of confidential information. However, various regulatory and export restrictions may prohibit us from using the strongest and most secure cryptographic protection available and thereby expose us to a risk of data interception. While we believe that our business model minimizes our accessing, transmitting and storing consumer information, because some of our activities may involve the storage and transmission of confidential personal or proprietary information, such as credit card numbers, security breaches and fraud schemes could damage our reputation and expose us to a risk of loss and possible liability. In addition, our payment transaction services may be susceptible to credit card and other payment fraud schemes perpetrated by hackers or other criminals. If such fraudulent schemes become widespread or otherwise cause merchants to lose confidence in our services, or in Internet payments systems generally, our revenues could suffer.

WE RELY ON THE INTERNET INFRASTRUCTURE, AND ITS CONTINUED COMMERCIAL VIABILITY, OVER WHICH WE HAVE NO CONTROL. ITS FAILURE COULD SUBSTANTIALLY UNDERMINE OUR BUSINESS STRATEGY.

Our success depends, in large part, on other companies maintaining the Internet system infrastructure, including maintaining a reliable network backbone that provides adequate speed, data capacity and security and to develop products that enable reliable Internet access and services. If the Internet continues to experience significant growth in the number of users, frequency of use and amount of data transmitted, the infrastructure of the Internet may be unable to support the demands placed on it, and as a result the Internet's performance or reliability may suffer. Because we rely heavily on the Internet, this would make our business less profitable.

WE MAY BE SUBJECT TO POTENTIAL LIABILITY FOR INFORMATION POSTED ON OUR CORPORATE WEBSITE.

The legal obligations and potential liability of companies which provide information by means of the Internet are not well defined and are evolving. Any liability of our company resulting from information posted on, or disseminated through, our corporate website could have a material adverse effect on our business, operating results and financial condition.

NEW AND POTENTIAL GOVERNMENTAL REGULATIONS DESIGNED TO PROTECT OR LIMIT ACCESS TO CONSUMER INFORMATION COULD ADVERSELY AFFECT OUR ABILITY TO PROVIDE THE SERVICES WE PROVIDE OUR MERCHANTS.

Due to the increasing public concern over consumer privacy rights, governmental bodies in the United States and abroad have adopted, and are considering adopting additional laws and regulations restricting the purchase, sale and sharing of personal information about customers. The laws governing privacy generally remain unsettled and it is difficult to determine whether and how existing and proposed privacy laws will apply to our business. Several states have proposed legislation that would limit the uses of personal information gathered using the Internet. Congress has also considered privacy legislation that could further regulate use of consumer information obtained over the Internet or in other ways. If legislation is passed by the individual states or Congress it would likely raise our cost of revenues, which would decrease our net profit.

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OUR SYSTEMS AND OPERATIONS ARE VULNERABLE TO DAMAGE OR INTERRUPTION FROM FIRE, FLOOD, POWER LOSS, TELECOMMUNICATIONS FAILURE, BREAK-INS, EARTHQUAKE AND SIMILAR EVENTS OUTSIDE OF OUR CONTROL.

Our success depends, in part, on the performance, reliability and availability of our services. If our systems were to fail or become unavailable, such failure would harm our reputation, result in a loss of current and potential customers and could cause us to breach existing agreements. Our systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, Internet breakdown, break-in, earthquake and similar events, and we would face significant damage as a result. In addition, our systems use sophisticated software which may in the future contain viruses that could interrupt service. For these reasons, we may be unable to develop or successfully manage the infrastructure necessary to meet current or future demands for reliability and scalability of our systems. If this happens, it is likely that we would lose customers and revenues would decrease.

WE RELY ON KEY MANAGEMENT.

Our success depends upon the personal efforts and abilities of Oleg Firer, our President and Chief Executive Officer. Our ability to operate and implement our business plan is heavily dependent on the continued service of Mr. Firer, as well as our ability to attract, retain and motivate other qualified personnel, particularly in the areas of sales, marketing and management for our company. We face aggressive and continued competition for such personnel. We cannot be certain that we will be able to attract, retain and motivate such personnel in the future.

We do not maintain key-man insurance on the life of Mr. Firer. If Mr. Firer were to resign or die, the loss could result in loss of sales, delays in new product and service development and diversion of management resources, and we could face high costs and substantial difficulty in hiring qualified successors and could experience a loss in productivity while any such successor obtains the necessary training and experience. The loss of Mr. Firer, and our inability to hire, retain and motivate qualified sales, marketing and management personnel for our company would have a material adverse effect on our business and operations.

OUR REVENUES ARE HIGHLY SENSITIVE TO OVERALL CHANGES IN THE ECONOMY AND CONSUMER SPENDING PATTERNS IN GENERAL.

As we receive a greater number of payment processing fees the more consumers spent at the locations of the merchants who are our clients, we are highly susceptible to downturns in the overall economy and changes in consumer spending. Due to the downturns in the credit markets, bankruptcies of several large employers, as well as overall layoffs in the global economy and general malaise in the global consumer economy, we expect our revenues for the near future to be highly volatile and most likely lower than for the same periods of fiscal 2008. As a result, our results of operations and the value of our securities could decline in value and/or become worthless.

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RISKS RELATING TO OUR COMMON STOCK

STOCKHOLDERS WILL INCUR SUBSTANTIAL DILUTION IF THE SHARE EXCHANGE AGREEMENT WITH LADP, IS CONSUMATED.

On or about February 5, 2009, the Company entered into an Amended and Restated Share Exchange Agreement (the “Exchange Agreement”) with LADP, LLC, a Delaware limited liability company (“LADP”), LA Digital (defined above), I-Toss, and the shareholders of I-Toss owning 100% of its outstanding shares, as described above. Pursuant to the Exchange Agreement, upon Closing (as defined above), the LADP Shareholders are to transfer to the Company 100% of the issued and outstanding interests of LA Digital, in exchange for an aggregate of 44,340 shares of the Company’s newly designated Series A Preferred Stock (the “Preferred Stock”). The Preferred Stock is to automatically convert upon the effective date of the Reverse Stock Split (as defined above) into 44,340,000 post-Reverse Stock Split shares of the Company’s common stock. Therefore as a result of the Exchange Agreement and related transactions, stockholders of the Company will incur substantial dilution of their ownership interest in the Company.

THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE BECAUSE THERE ARE A SUBSTANTIAL NUMBER OF OPTIONS AND WARRANTS OUTSTANDING AND THE SALE OF THE UNDERLYING SHARES MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.

The market price of our common stock may decline because there are a large number of options and warrants that are available for exercise, and the sale of shares underlying these options and warrants may depress the market price of our common stock. As of December 31, 2008, we had 73,984,095 shares of common stock issued and outstanding. Although the holders may not exercise or convert our outstanding warrants if such conversion or exercise would cause them to own more than 9.99% of our outstanding common stock, this restriction does not prevent the holders from converting and/or exercising some of their holdings. Exercise of these options and warrants would dilute the proportionate equity interest and voting power of holders of our common stock.

OUR HISTORIC STOCK PRICE HAS BEEN VOLATILE AND THE FUTURE MARKET PRICE FOR OUR COMMON STOCK IS LIKELY TO CONTINUE TO BE VOLATILE DUE IN PART TO THE LIMITED MARKET FOR OUR SHARES, WHICH MAY MAKE IT DIFFICULT FOR YOU TO SELL OUR COMMON STOCK FOR A POSITIVE RETURN ON YOUR INVESTMENT.

The public market for our common stock has historically been very volatile. Any future market price for our shares is likely to continue to be very volatile. This price volatility may make it more difficult for you to sell shares when you want at prices you find attractive. We do not know of any one particular factor that has caused volatility in our stock price. However, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies. Broad market factors, general economic and political conditions, and the investing public's negative perception of our business may reduce our stock price, regardless of our operating performance. Further, the market for our common stock is limited and we cannot assure you that a larger market will ever be developed or maintained.

IF WE ARE LATE IN FILING OUR QUARTERLY OR ANNUAL REPORTS WITH THE SEC, WE MAY BE DE-LISTED FROM THE OVER-THE-COUNTER BULLETIN BOARD.

Pursuant to Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely filing of periodic reports with the SEC, any OTCBB issuer which fails to file a periodic report (Form 10-Q's or 10-K's) by the due date of such report (not withstanding any extension granted to the issuer by the filing of a Form 12b-25), three (3) times during any twenty-four (24) month period is automatically de-listed from the OTCBB. Such removed issuer would not be re-eligible to be listed on the OTCBB for a period of one-year, during which time any subsequent late filing would reset the one-year period of de-listing. Furthermore, any issuer delisted from the OTCBB more than one (1) time in any twenty-four (24) month period for failure to file a periodic report would be ineligible to be re-listed for a period of one-year year, during which time any subsequent late filing would reset the one-year period of de-listing. As we were late in filing our 10-K for the period ended March 31, 2008, if we are late in our filings two more times in the current twenty-four (24) month period, or three times in any subsequent twenty-four (24) month period and are de-listed from the OTCBB, or if our securities are de-listed from the OTCBB two times in any twenty-four (24) month period for failure to file a periodic report, our securities may become worthless and we may be forced to curtail or abandon our business plan.

WE MAY INCUR SIGNIFICANT EXPENSES AS A RESULT OF BEING QUOTED ON THE OVER THE COUNTER BULLETIN BOARD, WHICH MAY NEGATIVELY IMPACT OUR FINANCIAL PERFORMANCE.

We incur significant legal, accounting and other expenses as a result of being listed on the Over the Counter Bulletin Board. The Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission has required changes in corporate governance practices of public companies. We expect that compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 as discussed in the following risk factor, may substantially increase our expenses, including our legal and accounting costs, and make some activities more time-consuming and costly. As a result, there may be a substantial increase in legal, accounting and certain other expenses in the future, which would negatively impact our financial performance and could have a material adverse effect on our results of operations and financial condition.

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OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING ARE NOT CONSIDERED EFFECTIVE, WHICH COULD RESULT IN A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND IN TURN HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our annual report for the year ended March 31, 2008, we were required to furnish a report by our management on our internal controls over financial reporting. Such report is required to contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. Beginning with the year ended March 31, 2010; this report will also contain a statement that our independent registered public accounting firm has issued an attestation report on management's assessment of internal controls. As we were unable to assert that our internal controls were effective as of March 31, 2008, and if in future years our independent registered public accounting firm is unable to attest that our management's report is fairly stated or they are unable to express an opinion on our management's evaluation or on the effectiveness of our internal controls, investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.

OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

·	that a broker or dealer approve a person's account for transactions in penny stocks; and

·	the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

·	obtain financial information and investment experience objectives of the person; and

·	make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

·	sets forth the basis on which the broker or dealer made the suitability determination; and

·	that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

WE CURRENTLY HAVE A SPORADIC, ILLIQUID, VOLATILE MARKET FOR OUR COMMON STOCK, AND THE MARKET FOR OUR COMMON STOCK MAY REMAIN SPORADIC, ILLIQUID, AND VOLATILE IN THE FUTURE.

We currently have a highly sporadic, illiquid and volatile market for our common stock, which market is anticipated to remain sporadic, illiquid and volatile in the future and will likely be subject to wide fluctuations in response to several factors, including, but not limited to:

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(1)	actual or anticipated variations in our results of operations;
(2)	our ability or inability to generate new revenues;
(3)	the number of shares in our public float;
(4)	increased competition; and
(5)	conditions and trends in the economy for consumer goods and credit card services.

Furthermore, because our common stock is traded on the over the counter bulletin board, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. Additionally, at present, we have a limited number of shares in our public float, and as a result, there could be extreme fluctuations in the price of our common stock. Further, due to the limited volume of our shares which trade and our limited public float, we believe that our stock prices (bid, asked and closing prices) are entirely arbitrary, are not related to the actual value of the Company, and do not reflect the actual value of our common stock (and in fact reflect a value that is much higher than the actual value of our common stock). Shareholders and potential investors in our common stock should exercise caution before making an investment in the Company, and should not rely on the publicly quoted or traded stock prices in determining our common stock value, but should instead determine value of our common stock based on the information contained in the Company's public reports, industry information, and those business valuation methods commonly used to value private companies.

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.

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ITEM 6. EXHIBITS

Exhibit Number Description of Exhibit

3.1	Articles of Incorporation of TerenceNet, Inc. dated October 11, 2000. (Incorporated by reference to Exhibit 3 to TerenceNet, Inc.'s Form 10-SB, as amended, filed with the Securities and Exchange Commission on April 5, 2002).

3.2	Bylaws of TerenceNet, Inc. (Incorporated by reference to Exhibit 4 to TerenceNet, Inc.'s Form 10-SB, as amended, filed with the Securities and Exchange Commission on April 5, 2002).

3.3	Certificate of Amendment of Articles of Incorporation (Incorporated by reference to Exhibit 3 to Atlantic Synergy, Inc.'s Form 8-K filed with the Securities and Exchange Commission on July 9, 2004).

3.4	Certificate of Designations of Acies Corporation Establishing the Designations, Preferences, Limitations and Relative Rights of Its Series A Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 13, 2009).

4.1	Form of Series A Common Stock Purchase Warrant issued to investors pursuant to the February 3, 2005 private placement (Incorporated by reference to Exhibit 4.2 to the Company's Form 8-K filed with the Securities and Exchange Commission on February 8, 2005).

10.1	Exchange Agreement by and between Acies, Inc. and Atlantic Synergy, Inc. dated as of July 2, 2004 (Incorporated by reference to Exhibit 2 to Atlantic Synergy, Inc.'s Form 8-K/A filed with the Securities and Exchange Commission on July 12, 2004).

10.2	Year 2004 Stock Award Plan of Atlantic Synergy, Inc. (Incorporated by reference to Exhibit 4 to Atlantic Synergy, Inc.'s Form S-8 filed with the Securities and Exchange Commission on August 31, 2004).

10.3	Year 2004 Officer/Director/Employee Stock Award Plan of Atlantic Synergy, Inc. (Incorporated by reference to Exhibit 4 to Atlantic Synergy, Inc.'s Form S-8 filed with the Securities and Exchange Commission on September 13, 2004).

10.4

Form of Subscription Agreement by and between Atlantic Synergy, Inc. and the purchasers identified on the signature pages thereto dated as of September 2, 2004 (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 4, 2005).

10.5	Investor Relations Agreement by and between Acies, Inc. and Investor Relations Network dated as of December 3, 2004 (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 4, 2005).

10.6	Securities Purchase Agreement by and between the Company and the purchasers identified on the signature pages thereto dated as of February 3, 2005 (Incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed with the Securities and Exchange Commission on February 8, 2005).

10.7	Registration Rights Agreement by and between the Company and the purchasers identified on the signature pages thereto dated as of February 3, 2005 (Incorporated by reference to Exhibit 4.3 to the Company's Form 8-K filed with the Securities and Exchange Commission on February 8, 2005).

10.8	Employment Agreement by and between the Company and Oleg Firer dated as of May 5, 2006 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 12, 2006).

10.9	Employment Agreement by and between the Company and Yakov Shimon dated as of July 1, 2004 (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 4, 2005).

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10.10

Employment Agreement by and between the Company and Miron Guilliadov dated as of July 1, 2004 (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 4, 2005).

10.11	Form of Subscription Agreement by and between GM Merchant Solutions, Inc. and the purchasers identified on the signature pages thereto dated as of June 2, 2004 (Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 4, 2005).

10.12	Employment Agreement by and between the Company and Jeffrey A. Tischler dated as of May 5, 2006 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 12, 2006).

10.13

Loan and Security Agreement by and between the Company and RBL Capital Group, LLC, dated October 31, 2006, providing a Term Loan Facility with a maximum borrowing of $2,000,000.00 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 6, 2006).

10.14

Convertible Promissory Note with Pinnacle Three Corporation (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 21, 2008).

10.15

Settlement Agreement and Mutual Release Between Pinnacle Three Corporation and the Company (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 21, 2008).

10.16

Convertible Promissory Note with Pinnacle Three Corporation (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 29, 2008).

10.17

Convertible Promissory Note with Oleg Firer (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 29, 2008).

10.18

Lease Termination Agreement between CRP/Capstone 14 W Property Owner, L.L.C. and the Company (Incorporated by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on November 17, 2008).

10.19

Amended and Restated Share Exchange Agreement (February 5, 2009) (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 13, 2009).

16.1	Letter from Amper, Politziner & Mattia, P.C. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 30, 2008).

31	Certification by Chief Executive Officer and acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).

32	Certification by Chief Executive Officer and acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).

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SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ACIES CORPORATION

Date: February 23, 2009	By:	/s/ Oleg Firer
		Oleg Firer
		Chief Executive Officer and Chief Financial Officer

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