Litigation Release No. 19741A / June 27, 2006

Securities and Exchange Commission v. AirTrac, Inc., Clarence Friend, and Christopher Bryan, Case No. SACV 06-582 JVS (RNBx) (C.D. Cal.)

SEC Charges a Southern California Technology Company and Two of Its Principals With Securities Fraud

The Securities and Exchange Commission ("Commission") today filed a complaint charging an Irvine, California technology company and two of its principals with committing fraud in violation of the federal securities laws in connection with a stock offering that raised nearly $1.8 million. Named as defendants in the complaint are AirTrac, Inc., its CEO, Clarence Friend, age 64, of Fountain Valley, California, and its principal salesman, Christopher Bryan, age unknown, of Santa Monica, California.

The Commission's complaint alleges that, between January 2004 and April 2005, the defendants raised nearly $1.8 million from the sale of AirTrac stock to over 200 investors nationwide through unsolicited telephone calls. AirTrac purports to develop and market voice-activated technology that can access the Internet and check e-mail through cellular telephones and personal digital assistants. The complaint alleges that the defendants falsely claimed that they would use most of the investor funds to develop and market AirTrac's purported technology, with the remainder being spent on fundraising efforts and miscellaneous expenses. In reality, the defendants spent much less than they represented would be spent on the purported technology and much more than had been represented on fundraising efforts, including paying approximately $140,000 to Bryan. The complaint also alleges that Friend misappropriated approximately $270,000 for his own personal use, including lease payments on his luxury home. According to the complaint, the defendants falsely represented that AirTrac was on the verge of signing lucrative contracts with several large, well-known telecommunications firms when, in fact, AirTrac had had, at most, only preliminary discussions with these companies. Furthermore, the defendants falsely represented that AirTrac was preparing to conduct an initial public offering and had applied for listing its stock on a securities exchange. In fact, AirTrac had not taken the necessary steps to conduct an initial public offering and had not applied for listing with a securities exchange.

The complaint, which was filed in the United States District Court for the Central District of California, alleges that AirTrac, Friend, and Bryan violated the securities registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint further charges that Friend and Bryan violated the broker-dealer registration provision, Section 15(a) of the Exchange Act. The Commission seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each of the defendants.