As
filed
with the Securities and Exchange Commission on November 13, 2006
Registration
No. 333-_____
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
D.C. 20549
____________________________
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
_____________________________
APRECIA,
INC.
(Name
of
small business issuer in its charter)
Delaware
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7372
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20-4378866
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(State
or other
Jurisdiction
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(Primary
Standard Industrial
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(I.R.S.
Employer
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of
Incorporation or
Organization)
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Classification
Code Number)
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Identification
No.)
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1177
High Ridge Road
Stamford,
CT 06905
(203)
321-2198
(Address
and telephone number of principal executive offices and principal place of
business)
Isidore
Sobkowski, President and Chief Executive Officer
Aprecia,
Inc.
1177
High Ridge Road
Stamford,
Connecticut 06905
(203)
321-1285
(Name,
address and telephone number of agent for service)
Copies
to:
Marc
J. Ross, Esq.
Stephen
M. Fleming, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas, 21st Flr.
New
York, New York 10018
(212)
930-9700
(212)
930-9725 (fax)
APPROXIMATE
DATE OF PROPOSED SALE TO THE PUBLIC:
From
time
to time after this Registration Statement becomes effective.
If
any
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: o
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. _________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. _________
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. _________
CALCULATION
OF REGISTRATION FEE
Title
of each class of securities
to
be registered
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Number
of Shares
to
be registered
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Proposed
maximum offering price per share
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Proposed
maximum aggregate
offering
price
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Amount
of
registration
fee
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Common
Stock, $0.001 par value
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5,769,930
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$0.12(1)
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$692,391.64
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$74.09
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|
|
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Total
Registration Fee
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5,769,930
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$0.12(1)
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$692,391.64
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$74.09
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(1)
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Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(e) under the Securities Act of
1933.
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(2)
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Calculated
in accordance with Rule 457(g)(1).
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The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The
information in this Prospectus is not complete and may be changed. The selling
stockholders may not sell these securities until the registration statement
is
filed with the Securities and Exchange Commission and becomes effective. This
Prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the sale is not
permitted.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2006
APRECIA,
INC.
5,769,930
Shares of
Common
Stock
This
prospectus relates to the sale of up to 5,769,930 shares of our common stock
which includes 1,603,264 shares of common stock and up to 4,166,667 shares
of
common stock issuable upon conversion of the secured convertible notes. This
is
the initial registration of shares of our common stock. The selling stockholders
will sell the shares from time to time at $0.12 per share.
Each
secured convertible note has a term of two years and entitles the holder to
receive 7% interest, payable on a semi-annual basis. Each
investor has the right to convert the secured convertible notes after the date
of issuance at any time, until paid in full, at the election of the investor,
into fully paid and nonassessable shares of our common stock.
Our
common stock is not traded on any national securities exchange and is not quoted
on any over-the-counter market. If our shares become quoted on the
Over-The-Counter Bulletin Board, sales will be made at prevailing market prices
or privately negotiated prices.
We
will
not receive any proceeds from the sale of the common stock. We have paid the
expenses of preparing this prospectus and the related registration
expenses.
Investing
in these securities involves significant risks. See "Risk Factors" beginning
on
page 7.
We
may
amend or supplement this prospectus from time to time by filing amendments
or
supplements as required. You should read the entire prospectus and any
amendments or supplements carefully before you make your investment decision.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this Prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is ________, 2006.
Table
of Contents
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F-1
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II-4
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The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the "risk factors" section,
the
financial statements and the notes to the financial statements. As
used
throughout this prospectus, the terms “Aprecia” the “Company,” “we,” “us,” and
“our” refer to Aprecia, Inc.
APRECIA,
INC.
We
currently have no significant business operations. We are currently developing
MonitorPlus™, an analysis tool designed to help the thoroughbred racing industry
by providing alerts when potential wagering fraud or money laundering activity
is detected. Available as a server based solution, MonitorPlus is being designed
to be a solution that provides alerts to industry participants upon the
discovery of potential fraud and/or money laundering activity. MonitorPlus
is
being built allow manual rules creation and to automatically derive patterns
and
rules from data.
There
is
currently no public market for our common stock. We are currently in discussions
with various market makers in order to arrange for an application to be made
with respect to our common stock, to be approved for quotation on the
Over-The-Counter Bulletin Board upon the effectiveness of this
prospectus.
We
are
registering shares of our common stock for resale pursuant to this prospectus
in
order to allow the selling stockholders to sell their holdings in the public
market and to begin developing a public market for our securities to be able
to
seek public financing and business development opportunities in the future.
Our
management would like a public market for our common stock to develop from
shares sold by the selling shareholders.
Our
executive offices are located at 1177
High
Ridge Road, Stamford, CT 06905,
and our
telephone number is:
(203)
321-2198.
We are
a Delaware corporation.
Common
stock outstanding before the offering
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Prior
to this Offering, we have 16,761,597 shares
of Common Stock outstanding.
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Securities
offered by the Selling Shareholders
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Up
to 5,769,930 shares of common stock, including 1,603,264 shares of
common
stock and up to 4,166,667 shares of common stock issuable upon the
conversion of the convertible debentures.
This
number represents 27.6% of our current outstanding stock assuming
the
conversion of our convertible debentures.
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Common
stock to be outstanding after the offering
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Up
to 20,928,264 shares.
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Use
of proceeds
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We
will not receive any proceeds from the sale of the common stock.
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The
above
information regarding common stock to be outstanding after the offering is
based
on 16,761,597
shares
of common stock outstanding as of November 6, 2006 and assumes the subsequent
conversion of the convertible debentures by our selling stockholders.
This
investment has a high degree of risk. Before you invest you should carefully
consider the risks and uncertainties described below and the other information
in this prospectus. If any of the following risks actually occur, our business,
operating results and financial condition could be harmed and the value of
our
stock could go down. This means you could lose all or a part of your investment.
WE
HAVE A LIMITED OPERATING HISTORY. THERE IS NO CERTAINTY THAT WE WILL EVER
ACHIEVE PROFITABILITY.
We
currently have no significant business operations and have incurred operating
losses since our inception in December 2005. We expect to incur significant
increasing operating losses for the foreseeable future, primarily due to the
expansion of our operations. The negative cash flow from operations is expected
to continue and to accelerate in the foreseeable future. Our ability to achieve
profitability depends upon our ability to discover and develop products, obtain
regulatory approval for our proposed products, and enter into agreements for
product development, manufacturing and commercialization. There can be no
assurance that we will ever achieve any revenues or profitable operations from
the sale of our proposed products.
WE
MAY BE UNABLE TO MANAGE OUR GROWTH OR IMPLEMENT OUR EXPANSION
STRATEGY.
We
may
not be able to expand our product and service offerings, our client base and
markets, or implement the other features of our business strategy at the rate
or
to the extent presently planned. Our projected growth will place a significant
strain on our administrative, operational and financial resources. If we are
unable to successfully manage our future growth, establish and continue to
upgrade our operating and financial control systems, recruit and hire necessary
personnel or effectively manage unexpected expansion difficulties, our financial
condition and results of operations could be materially and adversely
affected.
THE
SOFTWARE INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE
EFFECTIVELY.
The
software industry is highly competitive, rapidly evolving, and subject to
technological change and intense marketing by providers with similar products
and services. Many of our current competitors are significantly larger and
have
substantially greater market presence as well as greater financial, technical,
operational, marketing and other resources and experience than we have. In
the
event that such a competitor expends significant sales and marketing resources
in one or several markets we may not be able to compete successfully in such
markets. We believe that competition will continue to increase, placing downward
pressure on prices. Such pressure could adversely affect our gross margins
if we
are not able to reduce costs commensurate with such price reductions. In
addition, the pace of technological change makes it impossible for us to predict
whether we will face new competitors using different technologies to provide
the
same or similar services offered or proposed to be offered by us. If our
competitors were to provide better and more cost effective services, our
business initiatives could be materially and adversely affected.
THERE
IS NO GUARANTEE WE WILL SUCCESSFULLY ENTER INTO LICENSING AGREEMENTS FOR OUR
TECHNOLOGY.
We
are
currently negotiating licensing agreements for our technology. Our failure
to
successfully complete licensing agreements may jeopardize our ability to
continue our business and operations.
ADDITIONAL
FINANCING MAY BE NECESSARY FOR THE IMPLEMENTATION OF OUR GROWTH
STRATEGY.
We
may
require additional debt and/or equity financing to pursue our growth strategy.
Given our limited operating history and existing losses, there can be no
assurance that we will be successful in obtaining additional financing. Lack
of
additional funding could force us to curtail substantially our growth plans.
Furthermore, the issuance by us of any additional securities pursuant to any
future fundraising activities undertaken by us would dilute the ownership of
existing shareholders and may reduce the price of our common stock.
Furthermore,
debt financing, if available, will require payment of interest and may involve
restrictive covenants that could impose limitations on our operating
flexibility. Our failure to successfully obtain additional future funding may
jeopardize our ability to continue our business and operations.
WE
DO NOT HAVE ANY INTELLECTUAL PROPERTY PROTECTION FOR OUR PROPRIETARY
TECHNOLOGY.
We
do not
own any patents and do not currently have any plans to apply for patent
protection. As a result, others may obtain access to or independently develop
technologies or know-how similar to ours. Our success will also depend on our
ability to avoid infringement of patent or other proprietary rights of others.
We are not aware that we are infringing any patent or other such rights, nor
are
we aware of proprietary rights of others for which we will be required to obtain
a license in order to develop our products. However, there can be no assurance
that we are not infringing proprietary rights of others, or that we will be
able
to obtain any technology licenses we may require in the future.
OUR
TECHNOLOGY MAY BE SUBJECT TO DEFECTS AND PRODUCT
LIABILITY.
Software
products frequently contain errors or defects, especially when first introduced
or when new versions or enhancements are released. Defects and errors could
be
found in our products, future upgrades to our products or newly developed and
released products. Software defects could result in delays in market acceptance
or unexpected reprogramming costs, which could materially adversely affect
our
operating results. A successful product liability claim could have a material
adverse effect on our business, operating results and financial
condition.
WE
WILL BE HIGHLY DEPENDENT ON OUR FLAGSHIP MONITORPLUS
PRODUCT.
Our
flagship MonitorPlus product is expected to account for a significant portion
of
our total revenue. Because of this revenue concentration, our business could
be
harmed by a decline in demand for, or in the price of, tour MonitorPlus as
a
result of, among other factors, any change in our pricing model, a maturation
in
the markets for this product or other risks described in this
document.
THE
RESULTS OF OUR RESEARCH AND DEVELOPMENT EFFORTS ARE
UNCERTAIN.
We
believe that we will need to make significant research and development
expenditures to remain competitive. While we intend to perform extensive
usability and beta testing of new products, the products we are currently
developing or may develop in the future may not be technologically successful.
If they are not technologically successful, our resulting products may not
achieve market acceptance and our products may not compete effectively with
products of our competitors currently in the market or introduced in the
future.
WE
MUST RELY ON THIRD PARTY RELATIONSHIPS TO DEVELOP AND COMMERCIALIZE OUR
TECHNOLOGY.
We
do not
possess the human resources necessary to complete the development, marketing
and
commercialization of MonitorPlus. As a result, we will need to enter into
collaborations with third parties from whom we will outsource these resources.
The development of MonitorPlus is currently being outsourced to TeraCode, Inc.
Although TeraCode is based in the United States, the actual development work
for
MonitorPlus is being performed in Argentina.
This
strategy of reliance on third party relationships creates risks to us by placing
critical aspects of our business in the hands of third parties, who we may
not
be able to control as effectively as our own personnel. We cannot be sure that
any present or future collaborative agreements will be successful. If these
third parties do not perform in a timely and satisfactory manner, we may incur
additional costs and may be unable to commercialize our products on a timely
basis, if at all.
THE
LENGTH OF THE PRODUCT DEVELOPMENT AND SALES CYCLES ARE DIFFICULT TO PREDICT,
WHICH MAKES IT DIFFICULT TO PREDICT FUTURE REVENUES.
The
length of our product development and sales cycles may be greater than
originally expected. We may experience delays in future product development
or
sales. These delays could have a material adverse effect on the amount and
timing of future revenues. Because our licensing cycle is a lengthy process,
the
accurate prediction of future revenues from new licenses is
difficult.
WE
MUST EFFECTIVELY ADAPT TO CHANGES IN THE DYNAMIC TECHNOLOGICAL ENVIRONMENT
OF
THE INTERNET IN A TIMELY MANNER.
Critical
issues concerning the commercial use of the Internet, including security,
reliability, cost, ease of use, accessibility, quality of service or potential
tax or other government regulation, remain unresolved and may affect the use
of
the Internet as a medium to distribute or support our software products and
the
functionality of some of our products. If we are unsuccessful in timely
assimilating changes in the Internet environment into our business operations
and product development efforts, our future net revenues and operating results
could be adversely affected.
A
DOWNTURN IN ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR
BUSINESS.
The
software industry historically has been subject to substantial cyclical
variations, and our business typically relies upon the expenditure of corporate
information technology spending. A significant downturn in the United States
or
global economy or any other uncertainties regarding future economic prospects
could affect corporate information technology spending habits which would have
a
material adverse impact on our operations and financial results. We are also
highly dependent on the approval and acceptance of MonitorPlus by the regulatory
bodies of the US racing states and the Canadian Provincial and Federal
governments.
WE
ARE DEPENDENT UPON KEY PERSONNEL AND CONSULTANTS.
Our
success is heavily dependent on the continued active participation of our
current executive officer listed under “Management.” Loss of the services of our
officer could have a material adverse effect upon our business, financial
condition or results of operations. Further, our success and achievement of
our
growth plans depend on our ability to recruit, hire, train and retain other
highly qualified technical and managerial personnel. Competition for qualified
employees among companies in the technology industry is intense, and the loss
of
any of such persons, or an inability to attract, retain and motivate any
additional highly skilled employees required for the expansion of our
activities, could have a materially adverse effect on us. The inability on
our
part to attract and retain the necessary personnel and consultants and advisors
could have a material adverse effect on our business, financial condition or
results of operations.
WE
ARE CONTROLLED BY CURRENT OFFICERS, DIRECTORS AND PRINCIPAL
STOCKHOLDERS.
Our
directors, executive officers and principal (5%) stockholders and their
affiliates beneficially own approximately 71% of the outstanding shares of
Common Stock. Accordingly, our executive officers, directors, principal
stockholders and certain of their affiliates will have the ability to control
the election of our Board of Directors of the Company and the outcome of issues
submitted to our stockholders.
THERE
ARE RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES.
Until
registered for resale, investors must bear the economic risk of an investment
in
the Shares for an indefinite period of time. Rule 144 promulgated under the
Securities Act (“Rule 144”), which provides for an exemption from the
registration requirements under the Securities Act under certain conditions,
requires, among other conditions, a one-year holding period prior to the resale
(in limited amounts) of securities acquired in a non-public offering without
having to satisfy the registration requirements under the Securities Act.
However, our securities currently are not eligible for the Rule 144 exemption.
There can be no assurance that we will fulfill any reporting requirements in
the
future under the Exchange Act or disseminate to the public any current financial
or other information concerning us, as is required by Rule 144 as part of the
conditions of our availability.
IF
YOU PURCHASE SHARES IN THIS OFFERING, YOU WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.
The
$0.12
per share offering price of the common stock being sold under this prospectus
has been arbitrarily set. The price does not bear any relationship to our
assets, book value, earnings or net worth and it is not an indication of actual
value. Accordingly, if you purchase shares in this offering, you will experience
immediate and substantial dilution. You may also suffer additional dilution
in
the future from the sale of additional shares of common stock or other
securities.
THERE
IS PRESENTLY NO MARKET FOR OUR COMMON STOCK. ANY FAILURE TO DEVELOP OR MAINTAIN
A TRADING MARKET COULD NEGATIVELY AFFECT THE VALUE OF OUR SHARES AND MAKE IT
DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR SHARES.
Prior
to
this offering, there has been no public market for our common stock and a public
market for our common stock may not develop upon completion of this offering.
While we will attempt to have our common stock quoted
on
the Over-The-Counter Bulletin Board, since the OTC Bulleting Board is a dealer
system we will have to seek market-makers to provide quotations for the common
stock and it is possible that no market-maker will want to provide such
quotations.
Failure
to develop or maintain an active trading market could negatively affect the
value of our shares and make it difficult for you to sell your shares or recover
any part of your investment in us. Even if a market for our common stock does
develop, the market price of our common stock may be highly volatile. In
addition to the uncertainties relating to our future operating performance
and
the profitability of our operations, factors such as variations in our interim
financial results, or various, as yet unpredictable factors, many of which
are
beyond our control, may have a negative effect on the market price of our common
stock.
Even
if
our common stock is quoted on the OTC Bulletin Board under a symbol, the OTC
Bulletin Board provides a limited trading market. Accordingly, there can be
no
assurance as to the liquidity of any markets that may develop for our common
stock, the ability of holders of our common stock to sell our common stock,
or
the prices at which holders may be able to sell our common stock.
OUR
COMMON STOCK WILL BE SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC.
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:
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·
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that a broker or dealer approve a person's account
for
transactions in penny stocks; and |
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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.
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In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
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·
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obtain financial information and investment experience
objectives of the person; and |
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·
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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.
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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:
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· |
sets
forth the basis on which the broker or dealer made the suitability
determination; and
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· |
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
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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.
SHOULD
OUR STOCK BECOME LISTED ON THE OTC BULLETIN BOARD, IF WE FAIL TO REMAIN CURRENT
ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD
WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND
THE
ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY
MARKET.
Companies
trading on the Over-The-Counter Bulletin Board, such as us we are seeking to
become, must be reporting issuers under Section 12 of the Securities Exchange
Act of 1934, as amended, and must be current in their reports under Section
13,
in order to maintain price quotation privileges on the OTC Bulletin Board.
If we
fail to remain current on our reporting requirements, we could be removed from
the OTC Bulletin Board. As a result, the market liquidity for our securities
could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities
in the secondary market. In addition, we may be unable to get re-listed on
the
OTC Bulletin Board, which may have an adverse material effect on our
Company.
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholders. We will not receive any proceeds
from the sale of shares of common stock in this offering.
Market
for Securities
There
is
currently no public trading market for our common stock.
As
of
November 6, 2006, we had 16,761,597 shares
of
common stock issued and outstanding and approximately 54 stockholders of record
of our common stock.
Dividend
Policy
The
payment by us of dividends, if any, in the future rests within the discretion
of
our Board of Directors and will depend, among other things, upon our earnings,
capital requirements and financial condition, as well as other relevant factors.
We have not paid any dividends since our inception and we do not intend to
pay
any cash dividends in the foreseeable future, but intend to retain all earnings,
if any, for use in our business.
Equity
Compensation Plan Information
As
of
June 30, 2006, we have not adopted an equity compensation plan under
which our common stock is authorized for issuance.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking
Statements
The
information in this report contains forward-looking statements. All statements
other than statements of historical fact made in report are forward looking.
In
particular, the statements herein regarding industry prospects and future
results of operations or financial position are forward-looking statements.
These forward-looking statements can be identified by the use of words such
as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Our actual
results may differ significantly from management’s expectations.
The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative
of
actual operating results in the future. Such discussion represents only the
best
present assessment of our management.
Overview
As
of
June 30, 2006, we had $179,581 in working capital surplus. For the period from
December 15, 2005 (inception) through June 30, 2006, we used cash flow in
operating activities of $135,721 consisting primarily of the net loss of
$210,104, which was partially offset by adjustments for amortization of deferred
finance costs, increases in accrued expenses and increases in accrued liquidated
damages.
There
was
no cash used in investing activities.
Cash
provided by financing activities totaled $360,000 consisting of net proceeds
from the initial financing.
We
expect
capital expenditures to be nominal for the year ending June 30, 2007. These
anticipated expenditures are for continued investments in property and equipment
used in our business and software for our accounting and information
systems.
Financing
We
have
raised an aggregate of $500,000 in initial financing through a private offering
of convertible debentures and $56,191 through a private offering of common
stock.
Plan
of Operation and Financing Needs
Revenue
We
are
engaged in the development of software that provides alerts to upon the
discovery of potential fraud and/or money laundering activity. We have not
generated revenue to date. Our flagship product, MonitorPlus,
is being built to enhance cyber security in the thoroughbred industry by
allowing security scenarios to be applied to wagering activity and then issuing
alerts for suspect activity; such as for fraud detection and anti-money
laundering. MonitorPlus will receive wagering information from external sources
such as a database of historical wagers and then evaluate such information.
Once
a fraudulent wagering scenario has been created and a source of wagering data
has been attached, MonitorPlus will be able to analyze wagering activity data
and produce alerts. MonitorPlus is based on proven open source induction
technology. MonitorPlus will be comprised of two main functional components:
a
scenario builder and a scenario execution engine.
In
addition to wager activity analysis, MonitorPlus will allow analysts to create
“what-if” scenarios. For what-if scenarios, analysts will be able to specify a
test set of security rules (a “test scenario”) and view test
alerts.
We
intend
to generate revenue through (i) the licensing of our technology to parties
engaged in the regulation of the thoroughbred racing industry and (ii) the
licensing of our technology to third parties which will in turn develop and
sell
specifically tailored software solutions for customers based on our technology.
As of the date of this registration statement, we have not entered into any
agreement for the sale or license of our technology and cannot guarantee that
we
will be able to enter into such agreements in the future. Further, if we do
enter into such agreements, there is no guarantee that operations related to
the
agreements will be profitable.
We
plan
to introduce MonitorPlus for the thoroughbred industry as an entry point into
the marketplace, and then plans to develop complementary products based on
MonitorPlus. The projected timeframe for testing and release of MonitorPlus
is
the first quarter of the 2007 calendar year.
Net
Loss
Our
net
loss was $210,104 for the period from December 15, 2005 (inception) through
June
30, 2006.
Costs
and Expenses
Costs
and
expenses for the period from December 15, 2005 (inception) through June 30,
2006
were $182,642 and consisted primarily of $60,000 in officer’s compensation and
software development of $47,570.
Off-Balance
Sheet Arrangements
We
do not
have any off balance sheet arrangements that are reasonably likely to have
a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
CRITICAL
ACCOUNTING POLICIES AND USE OF ESTIMATES
Financial
Reporting Release No. 60, recently released by the Securities and Exchange
Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
The notes to the financial statements include a summary of significant
accounting policies and methods used in the preparation of our Financial
Statements. In addition, Financial Reporting Release No. 61 was recently
released by the SEC requires all companies to include a discussion which
addresses, among other things, liquidity, off-balance sheet arrangements,
contractual obligations and commercial commitments. The following is a brief
discussion of the more significant accounting policies and methods used by
us.
The
discussion and analysis of our financial condition and results of operations
are
based upon our financial statements, which have been prepared in accordance
with
accounting principles generally accepted in the United States. The preparation
of financial statements in accordance with generally accepted accounting
principles in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
including the recoverability of tangible and intangible assets, disclosure
of
contingent assets and liabilities as of the date of the financial statements
and
the reported amounts of revenues and expenses during the reported
period.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements:
Revenue
Recognition
Revenues
will be recognized in the period that services are provided. For revenue from
product sales, the Company recognizes revenue in accordance with Staff
Accounting Bulletin No. 104, Revenue Recognition (“SAB104”), which superceded
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(“SAB101”). SAB 101 requires that four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and
(4)
collectibility is reasonably assured. Determination of criteria (3) and (4)
are
based on management's judgments regarding the fixed nature of the selling prices
of the products delivered and the collectibility of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or no refund
will
be required.
SAB
104
incorporates Emerging Issues Task Force 00-21 (“EITF 00-21”),
Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses accounting
for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21
on
the Company's consolidated financial position and results of operations was
not
significant.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS
123R “Share Based Payment,” a revision of SFAS 123, “Accounting for Stock Based
Compensation.” This standard requires the Company to measure the cost of
employee services received in exchange for equity based on grant date fair
value
of the awards. The Company is required to adopt SFAS 123R effective January
1,
2006. This standard provides for a prospective application. Under this method,
we will begin recognizing compensation cost for equity based compensation for
all new or modified grants after the date of adoption.
Overview
We
were
incorporated in the State of Delaware in December 2005. We have been formed
to
fulfill what we believe are the industry’s need for cyber security technology in
the areas of wagering fraud and money laundering.
On
March
6, 2006, we entered into an Asset Purchase Agreement with Isidore Sobkowski.
Upon entering into the Asset Purchase Agreement, Mr. Sobkowski was appointed
as
an executive officer of our company. Pursuant to the Asset Purchase Agreement,
we acquired certain assets from Mr. Sobkowski relating to software based on
open
source induction technology designed to enable the automatic discovery of
patterns and the automatic creation of rules for raw data (the “Assets”). In
consideration of the purchase and sale of the Assets, we issued to Mr. Sobkowski
9,700,000 shares of common stock.
Industry
Background
Because
of the many jobs created by the thoroughbred racing industry, the industry
provides the only form of wagering in the United States that enjoys an exemption
from Federal laws that prohibit “wire wagering”. For example, a wager can
legally be placed on a horse race via the Internet. Wagering on thoroughbred
racing is currently permitted in a majority of US states. However, the Company’s
management believes that the current lack of a cyber wagering security framework
threatens the thoroughbred racing industry’s unique wagering franchise. Illegal
wagering activity in recent years, notably the Breeders’ Cup scandal in November
2002, has raised awareness of the need for a more secure wagering
environment.
There
are
several different ways to wager on thoroughbred racing. In addition to live
on-track wagering, most racetracks allow wagers to be placed on simulcast races
that occur at other tracks. For example, for a given race, it might be possible
to place a wager at Belmont Park in New York City for a race that is taking
place at Hollywood Park in Los Angeles. Wagers can also be placed at numerous
Off Track Betting (OTB) parlors around the country. Finally, the Internet is
increasingly serving as a venue for thoroughbred racing wagering.
The
increase in remote and cyber wagering presents a challenge to both the security
and integrity of the thoroughbred racing industry. As new technologies such
as
handheld wireless wagering devices are introduced, the demand for security
solutions is expected to grow.
Products
and Technology: MonitorPlus
MonitorPlus
MonitorPlus
is being built to enhance cyber security in the thoroughbred industry by
allowing security scenarios to be applied to wagering activity and then issuing
alerts for suspect activity; such as for fraud detection and anti-money
laundering.
MonitorPlus
will receive wagering information from external sources such as a database
of
historical wagers and then evaluate such information. Once a fraudulent wagering
scenario has been created and a source of wagering data has been attached,
MonitorPlus will be able to analyze wagering activity data and produce
alerts.
MonitorPlus
is based on proven open source induction technology. MonitorPlus will be
comprised of two main functional components: a scenario builder and a scenario
execution engine.
In
addition to wager activity analysis, MonitorPlus will allow analysts to create
“what-if” scenarios. For what-if scenarios, analysts will be able to specify a
test set of security rules (a “test scenario”) and view test
alerts.
Marketing
and Distribution
We
intend
to generate revenue through (i) the licensing of our technology to parties
engaged in the regulation of the thoroughbred racing industry and (ii) the
licensing of our technology to third parties which will in turn develop and
sell
specifically tailored software solutions for customers based on our technology.
As of the date of this registration statement, we have not entered into any
agreement for the sale or license of our technology and cannot guarantee that
we
will be able to enter into such agreements in the future. Further, if we do
enter into such agreements, there is no guarantee that operations related to
the
agreements will be profitable.
We
plan
to introduce MonitorPlus for the thoroughbred industry as an entry point into
the marketplace, and then plans to develop complementary products based on
MonitorPlus. The projected timeframe for testing and release of MonitorPlus
is
the first quarter of the 2007 calendar year.
In
addition to the thoroughbred racing market, potential markets for our technology
include industries that can benefit from pattern detection of security breaches,
attempted cyber-fraud, and cyber-risks. We expect to offer up to three
additional targeted products over the next few years that are designed to serve
the lottery, casino, banking and homeland security industries. In addition,
we
may pursue acquisitions in order to facilitate the growth of our company and
our
proposed product offerings. As of the date of this prospectus, we have no
definitive agreements or plans in connection with any acquisition.
Government
Regulation
Thoroughbred
racing and wagering is permitted in a majority of U.S. States (“U.S. Racing
States”). Each US Racing State regulates racing and wagering independently.
Canada regulates racing and wagering on the Federal level. The Association
of
Racing Commissioners International (RCI) (www.arci.com)
is an
association whose members include the regulators of U.S. Racing States and
Canada.
Intellectual
Property
The
MonitorPlus application has been designed as an industry specific application
of
open source induction technology for fraud detection in the thoroughbred
industry. Proprietary design for user screens and user interaction are currently
being constructed. The underlying algorithm for induction is open source. We
do
not currently have plans to apply for patent protection.
Research
and Development
Under
the
direction of Mr. Sobkowski, research and development is being outsourced to
TeraCode, Inc of Waltham, MA. TeraCode maintains an offshore development
facility in Buenos Aires, Argentina. Under contract, TeraCode provides a team
of
developers for the MonitorPlus project.
Competition
At
this
time, we are not aware of any comparable, commercially available products in
the
thoroughbred racing industry. Potential competition may come from home-grown
systems created by industry stakeholders such as racetracks or industry
associations.
In
order
to reduce start-up costs, we are currently structured as a virtual
company.
As such,
we do not currently own or rent any real estate property.
In
order
to reduce start-up costs, we are currently structured as a virtual company.
As
of
November 6, 2006, we had no employees. Mr.
Sobkowski, a consultant acting as our sole executive officer, has served at
a
compensation of fifteen thousand dollars per month, plus reimbursement of
out-of-pocket expenses..
We
are
not currently a party to any legal proceedings.
DIRECTORS
AND EXECUTIVE OFFICERS
Our
executive officers and directors and their respective ages and positions as
of
November 6, 2006 are as follows:
Name
|
Age
|
Position
|
Isidore
Sobkowski
|
50
|
President,
Chief Executive Officer and Director
|
Solomon
Lax
|
45
|
Director
|
Executive
Biographies
Isidore
Sobkowski.
Mr.
Sobkowski was the lead cyber-security consultant at the National Thoroughbred
Racing Association (NTRA). An expert in the areas of artificial intelligence,
predictive software and cyber security, Mr. Sobkowski served on the Board of
Directors and as a Member of the Audit Committee of Astea International from
June 2000 through January 2004. He also serves as founder, President and Chief
Executive Officer of Self Service Technologies (SST). Previously, he led a
number of
successful
technology companies, including Professional Help Desk (PHD). Upon PHD’s
acquisition by Computer Associates, Mr. Sobkowski was employed as a Division
Vice President at Computer Associates.
A
published author and international speaker, Mr. Sobkowski received Bachelors
and
Masters of Science degrees in Computer Science from The City University of
New
York as well as a professional certification in Artificial Intelligence from
New
York University.
Solomon
Lax.
Since
1998, Mr. Lax has been a partner in CS Capital Partners LLC, an early stage
venture capital firm. Since 2000 through 2006, Mr. Lax served as a member of
the
Board of Directors of Home Décor Products, an internet retailer. Since 2006, Mr.
Lax has served as Chief Executive Officer of Grace American Capital, LLC, a
specialty finance company. Mr. Lax has also been a principal in Cato Capital
LLC, a registered broker dealer, since 2006.
Board
of Directors
Our
Directors are elected by the vote of a majority in interest of the holders
of
our voting stock and hold office until the expiration of the term for which
he
or she was elected and until a successor has been elected and
qualified.
A
majority of the authorized number of directors constitutes a quorum of the
Board
for the transaction of business. The directors must be present at the meeting
to
constitute a quorum. However, any action required or permitted to be taken
by
the Board may be taken without a meeting if all members of the Board
individually or collectively consent in writing to the action.
Directors
may receive compensation for their services and reimbursement for their expenses
as shall be determined from time to time by resolution of the Board. Each of
our
directors currently receives no compensation for their service on our Board
of
Directors.
Summary
Compensation Table
|
|
|
Long-Term
Compensation
|
|
|
Annual
Compensation
|
Awards
|
Payouts
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual
Compen-
sation
($)
|
Restricted
Stock
Award(s)
($)
|
Securities
Under-lying
Options/ SARs (#)
|
LTIP
Payouts
($)
|
Isidore
Sobkowski
President,
Chief Executive Officer and Director
|
2005
|
-0-
|
-0-
|
180
|
-0-
|
-0-
|
-0-
|
Agreements
with Executive Officers
As
of
November 6, 2006, we have not entered into an employment agreement with Mr.
Sobkowski.
Mr Sobkowski is receiving monthly compensation of fifteen thousand dollars,
plus
reimbursement for out of pocket expenses.
On
March
6, 2006, we entered into an Asset Purchase Agreement with Isidore Sobkowski.
Upon entering into the Asset Purchase Agreement, Mr. Sobkowski was appointed
as
our sole executive officer. Pursuant to the Asset Purchase Agreement, we
acquired certain assets from Mr. Sobkowski relating to software based on open
source induction technology designed to enable the automatic discovery of
patterns and the automatic creation of rules from data (the “Assets”). In
consideration of the purchase and sale of the Assets, we issued to Mr. Sobkowski
9,700,000 shares of common stock at the closing.
The
following table sets forth certain information, as of November 6, 2006, with
respect to the beneficial ownership of the outstanding common stock by (i)
any
holder of more than five (5%) percent; (ii) each of our executive officers
and
directors; and (iii) our directors and executive officers as a group. Except
as
otherwise indicated, each of the stockholders listed below has sole voting
and
investment power over the shares beneficially owned.
Title
of Class
|
|
Name
of
Beneficial
Owner (1)
|
|
Number
of Shares
Beneficially
Owned (2)
|
|
Percentage
Ownership(2)
|
|
Common
Stock
|
|
|
Isidore
Sobkowski
|
|
|
9,700,000
|
|
|
57.9
|
%
|
Common
Stock
|
|
|
Soloman
Lax
|
|
|
2,200,000
|
|
|
13.1
|
%
|
Common
Stock
|
|
|
Michael
Hartstein
|
|
|
960,000
|
|
|
5.7
|
%
|
Common
Stock
|
|
|
Eroom
Systems Inc.
|
|
|
2,083,333
|
|
|
12.4
|
%
|
Common
Stock
|
|
|
All
Executive Officers and Directors as a Group (2 persons)
|
|
|
11,900,000
|
|
|
71.0
|
%
|
*
Less
than 1%
|
(1)
|
Except
as otherwise indicated, the address of each beneficial owner is c/o
Aprecia, Inc., 1177 High Ridge Road, Stamford, CT
06905.
|
|
(2)
|
Applicable
percentage ownership is based on 16,761,597 shares of common stock
outstanding as of November 6, 2006, together with securities exercisable
or convertible into shares of common stock within 60 days of November
6,
2006 for each stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission
and
generally includes voting or investment power with respect to securities.
Shares of common stock that are currently exercisable or exercisable
within 60 days of November 6, 2006 are deemed to be beneficially
owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other
person.
|
COMMON
STOCK
We
are
authorized to issue 250,000,000 shares of Common Stock, par value $.0001 per
share, and 10,000,000 shares of Preferred Stock, par value $.0001 per share.
As
of the date of this Registration Statement, we had 16,761,597 shares of Common
Stock outstanding and no shares of Preferred Stock outstanding.
The
holders of the shares of Common Stock have equal ratable rights to dividends
from funds legally available therefor, when, as and if declared by the Board
of
Directors and are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon the liquidation,
dissolution or winding up of the affairs of the Company. Holders of shares
of
Common Stock do not have preemptive, subscription or conversion
rights.
Holders
of shares of Common Stock are entitled to one vote per share on all matters
which shareholders are entitled to vote upon at all meetings of shareholders.
The holders of shares of Common Stock do not have cumulative voting rights,
which mean that the holders of more than 50% of the Company’s outstanding voting
securities can elect all of the directors of the Company.
The
payment by our company of dividends, if any, in the future rests within the
discretion of our Board of Directors and will depend, among other things, upon
the Company’s earnings, capital requirements and financial condition, as well as
other relevant factors. The Company has not paid any dividends since our
inception and does not intend to pay any cash dividends in the foreseeable
future, but intends to retain all earnings, if any, for use in our
business.
Our
bylaws provide for the indemnification of our directors and officers against
all
claims and liability by reason of serving as a director or officer. It shall
be
within the discretion of our Board of Directors whether to advance any funds
in
advance of disposition incurred by any director or officer in connection with
that proceeding. We are not, however, required to reimburse any legal expenses
in connection with any proceeding if a determination is made that the director
or officer did not act in good faith or in a manner reasonably believed to
be in
our best interests. Insofar as indemnification for liabilities arising under
the
Securities Act of 1933 (the "Act" or "Securities Act") may be permitted to
directors, officers or persons controlling us pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
No
market
currently exists for our shares. The price reflected in this prospectus of
$0.12
per share is the initial offering price of the shares of common stock upon
the
effectiveness of this prospectus. The selling stockholders may, from time to
time, sell any or all of their shares of common stock covered by this prospectus
in private transactions at a price of $0.12 per share or on any stock exchange,
market or trading facility on which the shares may then be traded. If our shares
are quoted on the Over-the-Counter Bulletin Board ("OTCBB"), the selling
stockholders may sell any or all of their shares at prevailing market prices
or
privately negotiated prices. The term "selling stockholders" includes donees,
pledgees, transferees or other successors-in-interest selling shares received
after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other non-sale related transfer. We will pay the
expense incurred to register the shares being offered by the selling
stockholders for resale, but the selling stockholders will pay any underwriting
discounts and brokerage commissions associated with these sales. The selling
stockholders may use any one or more of the following methods when selling
shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
privately
negotiated transactions; and
|
|
·
|
a
combination of any such methods of sale.
|
In
addition, any shares that qualify for sale under Rule 144 may be sold under
Rule
144 rather than through this prospectus.
The
$0.12
per share offering price of the shares of common stock being sold under this
prospectus has been arbitrarily set. The price does not bear any relationship
to
our assets, book value, earnings or net worth and it is not an indication of
actual value. Additionally, the offering price of our shares is higher than
the
price paid by our founders, and exceeds the per share value of our net tangible
assets. Therefore, if you purchase shares in this offering, you will experience
immediate and substantial dilution. You may also suffer additional dilution
in
the future from the sale of additional shares of common stock or other
securities, if the need for additional financing forces us to make such sales.
Investors should be aware of the risk of judging the real or potential future
market value, if any, of our common stock by comparison to the offering price.
In
offering the shares covered by this prospectus, the selling stockholders may
be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. Any broker-dealers who execute sales for the selling
stockholders will be deemed to be underwriters within the meaning of the
Securities Act. Any profits realized by the selling stockholders and the
compensation of any broker-dealer may be deemed to be underwriting discounts
and
commissions.
Each
selling stockholder and any other person participating in a distribution of
securities will be subject to applicable provisions of the Exchange Act and
the
rules and regulations thereunder, including, without limitation, Regulation
M,
which may restrict certain activities of, and limit the timing of purchases
and
sales of securities by, selling stockholders and other persons participating
in
a distribution of securities. Furthermore, under Regulation M, persons engaged
in a distribution of securities are prohibited from simultaneously engaging
in
market making and certain other activities with respect to such securities
for a
specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions. All of the foregoing may affect
the marketability of the securities offered hereby.
Any
securities covered by this prospectus that qualify for sale pursuant to Rule
144
under the Securities Act may be sold under that rule rather than pursuant to
this prospectus.
The
table
below sets forth information concerning the resale of the shares of common
stock
by the selling stockholders. We will not receive any proceeds from the resale
of
the common stock by the selling stockholders. We will receive proceeds from
the
exercise of the warrants. Assuming all the shares registered below are sold
by
the selling stockholders, none of the selling stockholders will continue to
own
any shares of our common stock.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common
stock
each person will own after the offering, assuming they sell all of the shares
offered.
Name
of Selling Stockholder
|
|
Total
Shares Held Including Shares of Common Stock and Shares Issuable
Upon Full
Conversion and/or
exercise
(3)
|
|
Total
Percentage of Outstanding Shares Assuming Full Conversion and/or
exercise
(3)
|
|
Shares
of Common Stock Included in Prospectus (3)
|
|
Beneficial
Ownership Before Offering (1)(2)
|
|
Percentage
of Common Stock Before
Offering
(1)(2)
|
|
Beneficial
Ownership After the Offering(4)
|
|
Percentage
of Common Stock Owned After Offering(4)
|
|
Alpha
Capital Aktiengesellschaft(5)
|
|
|
2,083,333(5
|
)
|
|
11.06
|
%
|
|
2,083,333(5
|
)
|
|
880,332
|
|
|
4.99
|
%
|
|
--
|
|
|
--
|
|
Double
U Master Fund LP(5)
|
|
|
833,333
|
|
|
4.74
|
%
|
|
833,333
|
|
|
833,333
|
|
|
4.74
|
%
|
|
--
|
|
|
--
|
|
Tobanna
Enterprises Corp. (5)
|
|
|
1,041,667
|
|
|
5.85
|
%
|
|
1,041,667
|
|
|
880,332
|
|
|
4.99
|
%
|
|
--
|
|
|
--
|
|
CMS
Capital(5)
|
|
|
208,333
|
|
|
1.23
|
%
|
|
208,333
|
|
|
208,333
|
|
|
1.23
|
%
|
|
--
|
|
|
--
|
|
Merit
Investments, Inc.
|
|
|
725,000
|
|
|
4.33
|
%
|
|
725,000
|
|
|
725,000
|
|
|
4.33
|
%
|
|
--
|
|
|
--
|
|
Palladium
Capital Advisors, LLC
|
|
|
195,000
|
|
|
1.16
|
%
|
|
195,000
|
|
|
195,000
|
|
|
1.16
|
%
|
|
--
|
|
|
--
|
|
Rosenblum,
Jonah
|
|
|
215000
|
|
|
1.28
|
%
|
|
215000
|
|
|
215000
|
|
|
1.28
|
%
|
|
--
|
|
|
--
|
|
Shlomo
Arnold
|
|
|
12,500
|
|
|
*
|
|
|
12,500
|
|
|
12,500
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Felice
Bergman
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
David
Brothman
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Ruth
Gillan Dohany
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Marilyn
Estreicher
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Sheldon
Estreicher
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Bernard
Friedman
|
|
|
41,667
|
|
|
*
|
|
|
41,667
|
|
|
41,667
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Sam
Galet
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Name
of Selling Stockholder
|
|
Total
Shares Held Including Shares of Common Stock and Shares Issuable
Upon Full
Conversion and/or
exercise
(3)
|
|
Total
Percentage of Outstanding Shares Assuming Full Conversion and/or
exercise
(3)
|
|
Shares
of Common Stock Included in Prospectus (3)
|
|
Beneficial
Ownership Before Offering (1)(2)
|
|
Percentage
of Common Stock Before
Offering
(1)(2)
|
|
Beneficial
Ownership After the Offering(4)
|
|
Percentage
of Common Stock Owned After Offering(4)
|
|
Hindy
Gestetner
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Brett
Goldberg
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Judith
Greenwood
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Howard
Hacker
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Anthony
Heller
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
J.
Lipman Heller
|
|
|
9,000
|
|
|
*
|
|
|
9,000
|
|
|
9,000
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Paul
Jacobs
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Jonathan
Javitt
|
|
|
4,167
|
|
|
*
|
|
|
4,167
|
|
|
4,167
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Samuel
A. Judd & Renne H. Migdal
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Robert
Kahan
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Jeff
King
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
|
|
|
|
|
Soroh
Y. Lax
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
|
|
|
|
|
Harold
Lindenthal
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Longworth
Capital Partners, LLC
|
|
|
8,334
|
|
|
*
|
|
|
8,334
|
|
|
8,334
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Haim
Maimon
|
|
|
8,334
|
|
|
*
|
|
|
8,334
|
|
|
8,334
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Morris
Mayer
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Benjamin
Mayer
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Peter
Miller
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Gadi
Mimoun
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
|
|
|
|
|
Haskell
& Mechie Nebenzahl JTWROS
|
|
|
8,334
|
|
|
*
|
|
|
8,334
|
|
|
8,334
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Marilyn
Niedober
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Irwin
Niedober
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Marna
Padowitz
|
|
|
4,167
|
|
|
*
|
|
|
4,167
|
|
|
4,167
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Raymond
Padowitz
|
|
|
4,167
|
|
|
*
|
|
|
4,167
|
|
|
4,167
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Seth
Padowitz
|
|
|
5,000
|
|
|
*
|
|
|
5,000
|
|
|
5,000
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Adam
N. Rin
|
|
|
4,167
|
|
|
*
|
|
|
4,167
|
|
|
4,167
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Ellen
Rosenblum
|
|
|
8,333
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Richard
Rosenblum
|
|
|
8,333
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Name
of Selling Stockholder
|
|
Total
Shares Held Including Shares of Common Stock and Shares Issuable
Upon Full
Conversion and/or
exercise
(3)
|
|
Total
Percentage of Outstanding Shares Assuming Full Conversion and/or
exercise
(3)
|
|
Shares
of Common Stock Included in Prospectus (3)
|
|
Beneficial
Ownership Before Offering (1)(2)
|
|
Percentage
of Common Stock Before
Offering
(1)(2)
|
|
Beneficial
Ownership After the Offering(4)
|
|
Percentage
of Common Stock Owned After Offering(4)
|
|
Rochelle
Rubinstein
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Michael
K. Sack
|
|
|
8,334
|
|
|
*
|
|
|
8,334
|
|
|
8,334
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Sarah
Sherman
|
|
|
20,834
|
|
|
*
|
|
|
20,834
|
|
|
20,834
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Jay
Smith
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
David
Stefansky
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
The
Rider Group
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
|
|
|
|
|
Henrique
Tischler
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Martin
Weiss
|
|
|
41,667
|
|
|
*
|
|
|
41,667
|
|
|
41,667
|
|
|
*
|
|
|
--
|
|
|
--
|
|
William
F. White
|
|
|
8,340
|
|
|
*
|
|
|
8,340
|
|
|
8,340
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Zamaga
Inc.
|
|
|
8,334
|
|
|
*
|
|
|
8,333
|
|
|
8,333
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Yehuda
Zavdi
|
|
|
20,834
|
|
|
*
|
|
|
20,834
|
|
|
20,834
|
|
|
*
|
|
|
--
|
|
|
--
|
|
Total
|
|
|
|
|
|
|
|
|
5,769,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Less
than one percent.
(1)
These
columns represent the aggregate maximum number and percentage of shares that
the
selling stockholders can own at one time (and therefore, offer for resale at
any
one time).
(2)
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, and the information
is
not necessarily indicative of beneficial ownership for any other purpose. Under
such rule, beneficial ownership includes any shares as to which the selling
stockholders has sole or shared voting power or investment power and also any
shares, which the selling stockholders has the right to acquire within 60 days.
The actual number of shares of common stock issuable upon the conversion of
the
secured convertible notes is subject to adjustment depending on, among other
factors, the future market price of the common stock, and could be materially
less or more than the number estimated in the table. Based on 16,761,597 shares
of common stock outstanding.
(3)
The
actual number of shares of common stock offered in this prospectus, and included
in the registration statement of which this prospectus is a part, includes
such
additional number of shares of common stock as may be issued or issuable upon
conversion of convertible notes by reason of any stock split, stock dividend
or
similar transaction involving the common stock, in accordance with Rule 416
under the Securities Act of 1933. However the certain selling stockholders
have
contractually agreed to restrict their ability to convert their convertible
notes and shares of preferred stock or exercise their warrants and receive
shares of our common stock such that the number of shares of common stock held
by them in the aggregate and their affiliates after such conversion or exercise
does not exceed 4.99% of the then issued and outstanding shares of common stock
as determined in accordance with Section 13(d) of the Exchange Act. Accordingly,
the number of shares of common stock set forth in the table for the selling
stockholders exceeds the number of shares of common stock that the selling
stockholders could own beneficially at any given time through their ownership
of
the secured convertible notes. In that regard, the beneficial ownership of
the
common stock by the selling stockholder set forth in the table is not determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
(4)
Assumes that all securities registered will be sold.
(5)
Represents shares of common stock issuable upon conversion of a secured
convertible debenture. Alpha Capital Aktiengesellschaft is a private investment
fund that is owned by all its investors and managed by Mr. Konrad Ackerman.
Mr.
Konrad Ackerman may be deemed the control person of the shares owned by such
entity, with final voting power and investment control over such shares. o
Sichenzia
Ross Friedman Ference LLP, New York, New York issued an opinion with respect
to
the validity of the shares of common stock being offered hereby.
Our
financial statements for June 30, 2006, have been included herein in reliance
upon the report of Wolinetz, Lafazan & Company, P.C., independent registered
public accountant, appearing elsewhere herein, and upon authority of said firm
as experts in accounting and auditing.
We
have
not previously been required to comply with the reporting requirements of the
Securities Exchange Act. We have filed with the SEC a registration statement
on
Form SB-2 to register the securities offered by this prospectus. For future
information about us and the securities offered under this prospectus, you
may
refer to the registration statement and to the exhibits filed as a part of
the
registration statement.
In
addition, after the effective date of this prospectus, we will be required
to
file annual, quarterly, and current reports, or other information with the
SEC
as provided by the Securities Exchange Act. You may read and copy any reports,
statements or other information we file at the SEC's public reference facility
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on
the
operation of the public reference room. Our SEC filings are also available
to
the public through the SEC Internet site at http\\www.sec.gov.
APRECIA,
INC.
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
Balance
Sheet as of June 30, 2006
|
|
F-3
|
Statements
of Operations for the period
|
|
|
December
19, 2005 (date of inception) to June 30, 2006
|
|
F-4
|
Statements
of Stockholders' Equity for the period December 19, 2005 (date
of
inception)
|
|
|
To
June 30, 2006
|
|
F-5
|
Statements
of Cash Flows for the period
|
|
|
December
19, 2005 (date of inception) to June 30, 2006
|
|
F-6
|
Notes
to Financial Statements
|
|
F-7
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors and Stockholders
Aprecia,
Inc.
We
have
audited the accompanying balance sheet of Aprecia, Inc. (a Development Stage
Company) (“the Company”) as of June 30, 2006 and the related statements of
operations, stockholders’ deficiency and cash flows for the period December 15,
2005 (inception) to June 30, 2006. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. Also, an audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Aprecia, Inc. at June 30, 2006,
and
the results of its operations and its cash flows for the period December 15,
2005 (inception) to June 30, 2006 in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 2 to the financial statements,
the Company has incurred an operating loss for the period December 15, 2005
(inception) to June 30, 2006, has had no revenues and has not commenced planned
principal operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans regarding those
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
WOLINETZ,
LAFAZAN & COMPANY, P.C.
Rockville
Centre, New York
September
28, 2006
(Except
with respect to Note 9, as to which the date is October 31, 2006)
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEET
JUNE
30,
2006
ASSETS
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
224,279
|
|
Subscriptions
Receivable
|
|
|
451
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
224,730
|
|
|
|
|
|
|
Intangible
Assets
|
|
|
|
|
|
|
|
|
|
Deferred
Finance Costs - Net
|
|
|
156,736
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
381,466
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Accrued
Expenses
|
|
$
|
28,482
|
|
Accrued
Liquidated Damages
|
|
|
16,667
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
45,149
|
|
|
|
|
|
|
Long
Term Debt
|
|
|
|
|
|
|
|
|
|
7%
Convertible Debentures
|
|
|
500,000
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
545,149
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficiency
|
|
|
|
|
Preferred
Stock, $.0001 par value; 10,000,000 shares authorized,
|
|
|
|
|
none
issued and outstanding
|
|
|
-
|
|
Common
Stock, $.0001 par value; 250,000,000 shares authorized,
|
|
|
|
|
16,293,333
issued and outstanding
|
|
|
1,629
|
|
Additional
Paid in Capital
|
|
|
44,792
|
|
Deficit
Accumulated During the Development Stage
|
|
|
(
210,104
|
)
|
|
|
|
|
|
Total
Stockholders’ Deficiency
|
|
|
(
163,683
|
)
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Deficiency
|
|
$
|
381,466
|
|
The
accompanying notes are an integral part of these financial
statements.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF OPERATIONS
FOR
THE
PERIOD DECEMBER 15 , 2005(INCEPTION) TO JUNE 30, 2006
Net
Revenues
|
|
$
|
-
|
|
|
|
|
|
|
Costs
and Expenses
|
|
|
|
|
|
|
|
|
|
Officer’s
Compensation
|
|
|
60,000
|
|
Software
Development
|
|
|
47,570
|
|
Other
General and Administrative Expenses
|
|
|
46,808
|
|
Amortization
|
|
|
28,264
|
|
|
|
|
|
|
Total
Costs and Expenses
|
|
|
182,642
|
|
|
|
|
|
|
Loss
from Operations before Other Expense
|
|
|
(182,642
|
)
|
|
|
|
|
|
Other
Expenses:
|
|
|
|
|
Interest
|
|
|
(
10,795
|
)
|
Liquidated
Damages
|
|
|
(
16,667
|
)
|
|
|
|
|
|
|
|
|
(
27,462
|
)
|
|
|
|
|
|
Net
Loss
|
|
$
|
(210,104
|
)
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding - Basic and Diluted
|
|
|
15,978,767 |
|
|
|
|
|
|
Net
Loss Per Common Share
|
|
$ |
(
.01 |
) |
The
accompanying notes are an integral part of these financial
statements.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS’ DEFICIENCY
FOR
THE
PERIOD DECEMBER 15, 2005(INCEPTION) TO JUNE 30, 2006
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional
|
|
Deficit
Accumulated
During
the
Development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued to Founders
|
|
|
-
|
|
$
|
-
|
|
|
4,510,000
|
|
$
|
451
|
|
$
|
-
|
|
$
|
-
|
|
$
|
451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
- at Par Value
|
|
|
-
|
|
|
-
|
|
|
9,700,000
|
|
|
970
|
|
|
-
|
|
|
-
|
|
|
970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued to a Private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
- at $.024 Per Share
|
|
|
-
|
|
|
-
|
|
|
2,083,333
|
|
|
208
|
|
|
49,792
|
|
|
-
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
on Sale of Common Stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
5,000
|
)
|
|
-
|
|
|
(
5,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss for the Period
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(210,104
|
)
|
|
(210,104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- Julne 30, 2006
|
|
$
|
-
|
|
$
|
-
|
|
|
16,293,333
|
|
$
|
1,629
|
|
$
|
44,792
|
|
$
|
(210,104
|
)
|
$
|
(163,683
|
)
|
The
accompanying notes are an integral part of these financial
statements.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CASH FLOWS
FOR
THE
PERIOD DECEMBER 15, 2005 (INCEPTION) TO JUNE 30, 2006
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(210,104
|
)
|
Adjustments
to Reconcile Net Loss to Net Cash
|
|
|
|
|
(Used)
in Operating Activities:
|
|
|
|
|
Amortization
of Deferred Finance Costs
|
|
|
28,264
|
|
Common
Stock Issued for Software Development
|
|
|
970
|
|
|
|
|
|
|
Changes
in Assets and Liabilities
|
|
|
|
|
Increase
in Accrued Expenses
|
|
|
28,482
|
|
Increase
in Accrued Liquidated Damages
|
|
|
16,667
|
|
|
|
|
|
|
Net
Cash (Used) in Operating Activities
|
|
|
(135,721
|
)
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
-
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
Proceeds
from Issuance of 7% Convertible Debentures
|
|
|
500,000
|
|
Payments
of Deferred Finance Costs
|
|
|
(185,000
|
)
|
Proceeds
from Issuances of Common Stock
|
|
|
50,000
|
|
Expense
on Sale of Common Stock
|
|
|
(
5,000
|
)
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
360,000
|
|
|
|
|
|
|
Increase
in Cash
|
|
|
224,279
|
|
|
|
|
|
|
Cash
Beginning of Period
|
|
|
-
|
|
|
|
|
|
|
Cash
End of Period
|
|
$
|
224,279
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
Cash
Paid for Interest
|
|
$
|
-
|
|
Cash
Paid for Income Taxes
|
|
$
|
250
|
|
|
|
|
|
|
Supplemental
Non-Cash Financing Activities:
|
|
|
|
|
Subscription
Receivable on Sale of Common Stock
|
|
$
|
451
|
|
The
accompanying notes are an integral part of these financial
statements.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO
FINANCIAL STATEMENTS
Note
1 - |
Summary
of Significant Accounting
Policies
|
Organization
Aprecia,
Inc. (“the Company”), was incorporated on December 15, 2005 under the laws of
the State of Delaware as. The Company has selected June 30 as its fiscal
year.
The
Company has not yet generated revenues from planned principal operations and
is
considered a development stage company as defined in Statement of Financial
Accounting Standards (‘SFAS’) No. 7. The Company plans on becoming involved in
the business of identifying money laundering in various sporting venues. There
is no assurance, however, that the Company will achieve its objectives or
goals.
Cash
and Cash Equivalents
The
Company considers all highly-liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Revenue
Recognition
The
Company utilizes the accrual method of accounting.
Advertising
Costs
Advertising
costs will be charged to operations when incurred. The Company did not incur
any
advertising costs during the period ended June 30, 2006.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method described
in SFAS No. 109, “Accounting For Income Taxes”, the objective of which is to
establish deferred tax assets and liabilities for the temporary difference
between the financial reporting and the tax bases of the Company’s assets and
liabilities at enacted tax rates expected to be in effect when such amounts
are
realized or settled. A valuation allowance related to deferred tax assets is
recorded when it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Loss
Per Share
The
compution of loss per share is based on the number weighted average of common
shares outstanding during the period presented. Diluted loss per common share
is
the same as basic loss per common share as the effect of potentially dilutive
securities (see Note 3) are antidilutive.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO
FINANCIAL STATEMENTS
Note
1 - |
Summary
of Significant Accounting Policies
(Continued)
|
Accounting
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of
the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those
estimated.
Fair
Value of Financial Instruments
The
carrying value of cash, subscription receivable and accrued liabilities
approximates fair value because of the immediate or short-term maturity of
these
financial instruments.
Software
Development
Software
development costs are charged to expense as incurred. The Company incurred
software development costs amounting to $47,570 during the period ended June
30,
2006.
Recently
Enacted Accounting Standards
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS
123R “Share Based Payment,” a revision of SFAS 123, “Accounting for Stock Based
Compensation.” This standard requires the Company to measure the cost of
employee services received in exchange for equity awards based on grant date
fair value of the awards. The Company is required to adopt SFAS 123R effective
January 1, 2006. The standard provides for a prospective application. Under
this
method, the Company will begin recognizing compensation cost for equity based
compensation for allnew or modified grants after the date of adoption. In
addition, the Company will recognize the unvested portion of the grant date
fair
value of awards issued prior to the adoption based on the fair values previously
calculated for disclosure purposes. At June 30, 2006, the Company had no options
outstanding.
In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets.”
SFAS 153 amends Accounting Principles Board (“APB”) Opinion No. 29, “Accounting
for Nonmonetary Transactions,” to require exchanges of nonmonetary assets to be
accounted for at fair value, rather than carryover basis. Nonmonetary exchanges
that lack commercial substance are exempt from this requirement. SFAS 153 is
effective for nonmonetary exchanges entered into in fiscal years beginning
after
June 15, 2005. The Company does not routinely enter into exchanges that could
be
considered nonmonetary, accordingly the Company does not expect adoption of
SFAS
153 to have a material impact on the Company’s financial
statements.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO
FINANCIAL STATEMENTS
Note
1 - |
Summary
of Significant Accounting Policies
(Continued)
|
In
June
2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections, a
replacement of APB Opinion No. 20, Accounting Changes, and SFAS 3, “Reporting
Accounting Changes in Interim Financial Statements”. SFAS 154 changes the
requirements for the accounting for and reporting of a change in accounting
principle. Previously, most voluntary changes in accounting principles were
required recognition via a cumulative effect adjustment within net income of
the
period of the change. SFAS 154 requires retrospective application to prior
periods’ financial statments, unless it is impracticable to determine either the
period-specific effect of the cumulative effect of the change. SFAS 154 is
effective for accounting changes made in fiscal years beginning after December
15, 2005; however, SFAS 154 does not change the transaction provisions of any
existing accounting pronouncements. The Company believes the adoption of SFAS
154 will not have a material impact on its financial statements.
The
Company incurred net losses of $210,104 for the period December 15, 2005
(inception) to June 30, 2006 and has a stockholders’ deficiency of $163,683 at
June 30, 2006. These factors raise substantial doubt about the Company’s ability
to continue as a going concern.
There
can
be no assurance that sufficient funds required during the next year or
thereafter will be generated from operations or that funds will be availavle
from external sources such as debt or equity financings or other potential
sources. The lack of additional capital resulting from the inability to generate
cash flow from operations or to raise capital from external sources would force
the Company to substantially curtail or cease operations and would, therefore,
have a material adverse effect on its business. Furthermore, there can be no
assurance that any such required funds, if available, will be available on
attractive terms or that they will not have a significant dilutive effect on
the
Company’s existing stockholders.
The
accompanying financial statements do not include any adjustments related to
the
recoverability or classification of asset-carrying amounts or the amounts and
classification of liabilities that may result should the Company be unable
to
continue as a going concern.
During
the period December 15, 2005 (inception) to June 30, 2006 the Company relied
heavily on its financing needs on the proceeeds it received from the issuance
of
$500,000 principal convertible debentures.
The
Company is attempting to address its lack of liquidity by raising additonal
funds, either in the form of debt or equity or some combination thereof. The
Company currently plans to raise approximately $50,000 through a private
placement of its securities. There can be no assurances that the Company will
be
able to raise the additional funds it requires.
APRECIA,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO
FINANCIAL STATEMENTS
Note
3 - |
Subscriptions
Receivable
|
At
June
30, 2006, subscriptions receivable amounts to $451 resulting from the sale
of
common stock to the founders
Note
4 - |
7%
Convertible Debentures
|
The
Company entered into a Securities Purchase Agreement dated as of March 10,
2006,
with four investors relating to the issuance and sale, in a private placement
exempt from the registration requirements of the Securities Act of 1933, as
amended, of 7% Convertible Debentures in the principal amount of $500,000.
Accrued interest on the convertible debentures as of June 30, 2006 was $10,695.
The debentures are collateralized by all of the now owned and hereafter acquired
rights, title and interest of the Company’s assets.
The
debentures mature 24 months from the closing. The debentures are convertible
at
the option of the holder into the Company’s common stock at the rate of $.12 per
share. Deferred finance costs incurred as a result of the private offering
of
the debentures were $185,000.
Since
a
registration statement covering the underlying common stock was not filed within
90 days, the Company is required to pay liquidated damages of 2% of the
principal amount of $500,000 per month plus interest at the rate of 18% if
the
Company fails to pay the liquidated damages within seven days. Accordingly,
the
Company has accrued $16,667 in liquidated damages and $100 interest on the
liquidated damages as of June 30, 2006.
In
March
2006, the Company sold 4,510,000 shares of common stock valued at $451 to the
founders of the Company.
In
March
2006, the Company issued 9,700,000 shares of common stock valued at $970 for
software development costs.
In
March
2006, the Company sold 2,083,333 shares of common stock to a private investor
for $50,000, and paid cash commissions of $5,000.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO
FINANCIAL STATEMENTS
The
Company’s Board of Directors may, without further action by the Company’s
stockholders, from time to time, direct the issuance of any authorized but
unissued or unreserved shares of Preferred Stock in series and at the time
of
issuance, determine the rights, preferences and limitations of each series.
The
holders of the Preferred Stock may be entitled to receive a preference payment
in the event of any liquidaton, dissolution or winding-up of the Company before
any payment is made to the holders of the Common Stock. Furthermore, the Board
of Directors could issue Preferred Stock with voting and other rights that
could
adversely affect the voting power of the holders of the Common
Stock.
Note
7 - |
Commitments
and Contingencies
|
From
time
to time, the Company is named in legal actions in the normal course of business.
In the opinion of managements, the outcome of these matters, if any, will
not
have a material impact on the financial condition or results of operations
of
the Company.
At
June
30, 2006 the Company had available a federal net operating loss carryforward
to
reduce future taxable income, if any, of approximately $370,000. The net
operating loss carryforward expires June 30, 2026. Certain significant changes
in ownership of the Company may restrict the future utilization of this tax
loss
carryforward.
At
June
30, 2006 the Company has a deferred tax asset of approximately $126,000
representing the benefit of it’s net operating loss carryforward. The Company
has not recorded a tax benefit because realization of the benefit is uncertain
and therefore a valuation allowance has been fully provided against the deferred
tax asset. The difference between the federal statutory rate of 34% and the
Company’s effective tax rate of 0% is due to the initial increase in the
valuation allowance of $126,000 in 2006.
Note
9 - |
Subsequent
Events
|
On
October 31, 2006 the Company completed an offering of 468,264 shares of its
common stock for gross proceeds of $56,192.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under
Section 145 of the General Corporation Law of the State of Delaware, we can
indemnify our directors and officers against liabilities they may incur in
such
capacities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). Our by laws provides that we shall indemnify our
directors and officers against all claims and liability by reason of serving
as
a director or officer. We are required to reimburse all legal expenses incurred
by any director or officer in connection with that proceeding, however it shall
be within the discretion of the Board of Directors whether to advance any funds
in advance of disposition of any action, suite or proceeding. We are not,
however, required to reimburse any legal expenses in connection with any
proceeding if a determination is made that the director or officer did not
act
in good faith or in a manner reasonably believed to be in our best interests.
This provision in the by laws does not eliminate the duty of care, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director’s duty of loyalty to us or our stockholders, for acts or omissions not
in good faith or involving intentional misconduct or knowing violations of
the
law, for actions leading to improper personal benefit to the director, and
for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director’s
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
The
following table sets forth the costs and expenses, other than underwriting
discounts and commissions, if any, payable by the Registrant relating to the
sale of common stock being registered. All amounts are estimates except the
SEC
registration fee.
SEC
registration fee
|
|
$
|
74.09
|
|
Printing
and engraving expenses
|
|
$
|
10,000.00
|
|
Legal
fees and expenses
|
|
$
|
50,000.00
|
|
Accounting
fees and expenses
|
|
$
|
25,000.00
|
|
Miscellaneous
expenses
|
|
$
|
5,000.00
|
|
Total
|
|
$
|
90,074.09
|
|
The
Registrant has agreed to bear expenses incurred by the selling stockholders
that
relate to the registration of the shares of common stock being offered and
sold
by the selling stockholders.
On
March
3, 2006, the Company issued an aggregate of 4,510,000 shares of common stock
to
five parties in consideration of $451.
On
March
6, 2006, we entered into an Asset Purchase Agreement with Isidore Sobkowski.
Upon entering into the Asset Purchase Agreement, Mr. Sobkowski was appointed
as
an executive officer of our company. Pursuant to the Asset Purchase Agreement,
we acquired certain assets from Mr. Sobkowski relating to software based on
open
source induction technology designed to enable the automatic discovery of
patterns and the automatic creation of rules for raw data (the “Assets”). In
consideration of the purchase and sale of the Assets, we issued to Mr. Sobkowski
9,700,000 shares of common stock.
On
March
7, 2006, the Company issued 2,083,333 shares of common stock to eRoomSystems
Technologies, Inc. for a purchase price of $50,000.
On
March
10, 2006, the Company entered into a Securities Purchase Agreement with several
accredited and/or qualified institutional investors pursuant to which the
investors subscribed to purchase an aggregate principal amount of $500,000
in 7%
secured convertible promissory notes for an aggregate purchase price of
$500,000. Each investor has the right to convert the secured convertible notes
after the date of issuance at any time, until paid in full, at the election
of
the investor, into fully paid and nonassessable shares of the Company’s common
stock. The conversion price per share is $0.12. The conversion price is
adjustable in the event of any stock split or reverse stock split, stock
dividend, reclassification of common stock, recapitalization, merger or
consolidation. In addition, the conversion price of the secured convertible
notes will be adjusted in the event that the Company spins off or otherwise
divests a material part of its business or operations or disposes of all or
a
portion of its assets. The Company’s obligation to repay all principal, and
accrued and unpaid interest under the convertible notes is secured by all of
its
assets pursuant to a certain Security Agreement dated as of March 10,
2006.
On
October 31, 2006, the Company closed a private placement pursuant to which
it
sold 468,264 shares of common stock to 47 investors for $.12 per share for
aggregate proceeds of $56,191.
*
All of
the above offerings and sales were deemed to be exempt under Rule 506 of
Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
No
advertising or general solicitation was employed in offering the securities.
The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of the Company or executive officers
of the Company, and transfer was restricted by the Company in accordance with
the requirements of the Securities Act of 1933. In addition to representations
by the above-referenced persons, we have made independent determinations that
all of the above-referenced persons were accredited or sophisticated investors,
and that they were capable of analyzing the merits and risks of their
investment, and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access
to
our Securities and Exchange Commission filings.
Except
as
expressly set forth above, the individuals and entities to whom we issued
securities as indicated in this section of the registration statement are
unaffiliated with us.
ITEM
27. EXHIBITS.
Exhibit
Number
|
Description
of Exhibit
|
|
|
3.1
|
Certificate
of Incorporation.
|
3.2
|
By-Laws.
|
4.1
|
Securities
Purchase Agreement dated March 10, 2006 by and between the Company
and
Alpha Capital Aktiengesellschaft, Double U Master Fund LP, Tobanna
Enterprises Corp., and CMS Capital
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4.2
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Form
of Debenture dated March 10, 2006
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4.3
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Registration
Rights Agreement dated March 10, 2006 by and between the Company
and Alpha
Capital Aktiengesellschaft, Double U Master Fund LP, Tobanna Enterprises
Corp., and CMS Capital
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4.4
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Security
Agreement dated March 10, 2006 by and between the Company and Alpha
Capital Aktiengesellschaft, Double U Master Fund LP, Tobanna Enterprises
Corp., and CMS Capital and Michael Hartstein, as collateral
agent
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4.5
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Collateral
Agent Agreement dated March 10, 2006 by and between the Company and
Alpha
Capital Aktiengesellschaft, Double U Master Fund LP, Tobanna Enterprises
Corp., and CMS Capital and Michael Hartstein, as collateral
agent
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5.1
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Opinion
of Sichenzia Ross Friedman Ference LLP
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10.1
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Asset
Purchase Agreement by and between Isidore Sobkowski and the Company
dated
March 6, 2006
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10.2
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Voting
Agreement by and between Michael Hartstein, Solomon Lax and Isidore
Sobkowski
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23.1
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Consent
of WOLINETZ, LAFAZAN & COMPANY, P.C.
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23.2
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Consent
of Sichenzia Ross Friedman Ference LLP (contained in Exhibit
5.1)
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ITEM
28. UNDERTAKINGS.
The
undersigned Company hereby undertakes to:
(1)
File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
(i)
Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");
(ii)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of the securities offered would not exceed
that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act
if,
in the aggregate, the changes in volume and price represent no more than a
20%
change in the maximum aggregate offering price set forth in the "Calculation
of
Registration Fee" table in the effective registration statement, and
(iii)
Include any additional or changed material information on the plan of
distribution.
(2)
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3)
File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4)
For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned undertakes that in a primary offering of securities of the
undersigned small business issuer pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means
of
any of the following communications, the undersigned small business issuer
will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i)
Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to
Rule
424;
(ii)
Any
free writing prospectus relating to the offering prepared by or on behalf of
the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
(iii)
The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
(iv)
Any
other communication that is an offer in the offering made by the undersigned
small business issuer to the purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that
in
the opinion of the Securities and Exchange Commission such indemnification
is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the Company of expenses incurred or paid by a director, officer
or
controlling person of the Company in the successful defense of any action,
suit
or proceeding) is asserted by such director, officer or controlling person
in
connection with the securities being registered, the Company will, unless in
the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule
430B
or other than prospectuses filed in reliance on Rule
430A,
shall
be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made
in
any such document immediately prior to such date of first use.
In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorizes this registration statement
to be signed on its behalf by the undersigned, in Stamford, Connecticut, on
November 13, 2006.
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APRECIA,
INC. |
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By: |
/s/ Isidore
Sobkowski |
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Isidore
Sobkowski |
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President
and
Chief Executive Officer (Principal Executive Officer, Principal Accounting
Officer
and Principal Financial Officer)
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KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Isidore Sobkowski his true and lawful
attorneys-in-fact, with full power of substitution and resubstitution, for
him
and in his name, place and stead, in any and all capacities to sign any and
all
amendments (including post-effective amendments) to this registration statement
and to sign a registration statement pursuant to Section 462(b) of the
Securities Act of 1933, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact, full power and authority
to do
and perform each and every act and thing requisite and necessary to be done
in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact or his substitute or substitutes, may lawfully do or cause
to
be done by virtue hereof.
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and
on the dates stated: Pursuant to the requirements of the Securities Act of
1933,
as amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated:
SIGNATURE
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TITLE
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DATE
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/s/
Isidore Sobkowski
Isidore
Sobkowski
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President,
Chief Executive Officer and Director (Principal Executive Officer,
Principal Accounting Officer and Principal Financial
Officer)
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November
13, 2006
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/s/
Solomon Lax
Solomon
Lax
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Director
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November
13, 2006
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