SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
(Mark
One)
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x
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2007
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o
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from ___________ to ___________
Commission
File number 333-121659
ALLIANCE
RECOVERY CORPORATION
(Name of
small business issuer in its charter)
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DELAWARE
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30-0077338
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(State
or other jurisdiction of
incorporation
or organization)
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(IRS
Employer Identification No.)
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1000
N.W., ST, SUITE 1200, WILMINGTON, DE
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19801
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(Address
of principal executive offices)
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(Zip
Code)
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(519)
671-0417
(Registrant’s
telephone number, including area code)
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Securities
registered under Section 12(b) of the Exchange Act:
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|
|
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Title
of each class registered:
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Name
of each exchange on which registered:
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None
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None
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Securities
registered under Section 12(g) of the Exchange Act:
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Common
Stock, par value $.01
(Title
of class)
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Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
o
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
o
Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act.
Yes
x
No
o
Revenues
for year ended December 31, 2007: $0
Aggregate
market value of the voting common stock held by non-affiliates of the registrant
as of December 31, 2007, was: $1,648,955.55
Number of
shares of the registrant’s common stock outstanding of April 15, 2008 was:
20,589,425
Transitional Small Business Disclosure
Format:
Yes
o
No
x
PART I
Item 1.
Description of
Business
On
November 6, 2001, we were incorporated in the State of Delaware under the name
American Resource Recovery Group Ltd. On April 18, 2002, we filed a certificate
of amendment changing our name to Alliance Recovery Corporation. On April 22,
2002, we filed another certificate of amendment to increase our authorized
shares to 10,000,000, par value $.01. Finally, on July 7, 2004, we filed a
certificate of amendment increasing our authorized shares to
100,000,000.
We intend
to implement suitable resource recovery technologies and strategies (the “ARC
Process”) to convert industrial and other waste materials into electrical energy
for sale to specific industrial entities or into local power grids, and to
produce for re-sale by products including carbon black, steel, and steam and/or
hot water. We will be able to undertake this after we raise $20,000,000 and
construct our first facility. We are currently seeking financing and therefore
upon the raising of $20,000,000 we will take 18 months to construct the
facility.
We
believe that management and our third party consulting engineers have identified
a one-step manufacturing process based upon the utilization of existing
manufacturing processes to efficiently convert rubber wastes of all kinds
including scrap tires into fuel oil, for electrical power generation, with
minimal if any negative impact to the environment. We believe this system may be
patentably distinct. However, the system components are available commonly from
fabricators and suppliers. The results of our development efforts are now
commercially available.
Investigations
of several existing thermal manufacturing and processing technologies have
contributed to the use of existing manufacturing and chemical processes as the
basis of the ARC Unit for the production of oils and gases and other commercial
products including carbon black.
United
States Environment Protection Agency studies conducted during 1999-2000 have
confirmed that the fuel oil derived from rubber waste was as good a feedstock
for commercial carbon black production as Exxon oil (Chemical Economic
Handbook).
The first
ARC facility, when funded, will be operated as our subsidiary and will take
approximately 18 months to construct. Upon construction and installation of
processing equipment, the facility will annually utilize up to 100,000,000
pounds of waste rubber as the feedstock to produce oils and gases for the
production processes and to generate electricity. In terms of passenger tires,
this represents the annual reduction of approximately 4.6 million scrap
tires.
In 2001,
292 million scrap tires were generated in the United States (the source of this
Information is Chaz Miller of Environmental Industry Associations as reported by
Wasteage.com on June 1, 2003). Of the 292 million scrap tires, cars contribute
two-thirds of scrap tires, the remainder comes from trucks, heavy equipment,
aircraft, off-road and scrapped vehicles.
The
aforementioned number of scrap tires generated is equivalent to approximately 1
scrap tire for every person living in the U.S. today. In Michigan, Ohio, New
York, Pennsylvania, and the province of Ontario, the population is well over 50
million, and all these major states are connected to Lake Erie. We have
identified suitable sites with port locations in the Great Lakes region to allow
for the utilization of tug and barge transportation which continues to be the
most inexpensive form of transportation for large volumes of
freight.
We
anticipate that the first facility will produce fuel oil to be used for the
production of electrical energy. The oil generated from the thermal
decomposition of rubber analyzed by various testing facilities is equivalent to
a fuel oil comprised of 69% kerosene and 26% diesel fuel. Continued commercial
use of both diesel and kerosene is indicative of the overall fuel
quality.
Similarly,
a commercial grade 700 series carbon black is generated as by-product of the
rubber to oil conversion process. This process also captures the steel from the
rubber for sale as scrap. We believe that there are international and domestic
markets for these products. According to industry sources, global consumption of
carbon black is approximately 17 billion pounds annually. Carbon black is an
industrial product generated through an energy-intensive process and utilized
among and in the manufacture of rubber, plastics, inks, paints, dyes, lacquers,
fibers, ceramics, enamels, paper, coatings, leather finishes, dry-cell
batteries, electrodes and carbon brushes, and electrical
conductors.
Conventional
carbon black manufacturers need both: feedstock oil for conversion to carbon
black, and natural gas or methane to fuel the production process. The ARC
process also saves global resources by recovering the hydrocarbon available from
the polymeric constituents of the waste rubber, converting them to feedstock oil
and gases. By maintaining carbon black manufacturing temperatures and process
conditions in the ARC Unit furnace, as the rubber waste is converted to fuel
oil, a 700 series carbon black is generated as a by-product of the thermal
process and is subsequently conveyed, stored and/or packaged with conventional
carbon black manufacturing equipment. The utilization of existing process
technology and chemical reactions with established manufacturing protocols
ensures that ARC management and their contract operators can leverage specific
operations history into positive performance results.
An ARC
installation also provides large urban regions with a point of final disposition
for scrap tire and rubber waste without any pollution to the environment and/or
public health risks. Disposal operators will be encouraged to deliver their
rubber waste in the baled ecoblocks which is a much more cost effective method
of transportation as a direct result of the volume reduction occurring in the
baling process. The baling process ARC will utilize to produce ecoblocks for
safe storage and handling, ensures that water cannot collect and create
conditions suitable for mosquito incubation, a matter that continues to be a
public health concern throughout the United States. Additionally, ecoblock
storage from a fire perspective is considered a much safer alternative than
simple dumping of rubber waste as there is negligible fire hazard associated
with ecoblock storage. Fire Department testings suggest that the bales are
difficult to ignite and once ignited, are easily extinguished.
The ARC
Process is not classified as a federally regulated source of emissions, because
the environmental emissions are below maximum EPA standards, thus, only state
administrative approval is required for our plant installations. It is intended
that ARC installations will be located near large urban communities which
generate vast amounts of rubber waste. This will allow us to establish a network
of facilities in communities where rubber waste is generated.
Generally,
communities view tires as a public health issue as the tire collects water in
the hollow donut shape and becomes an ideal breeding ground for mosquitoes. The
most common practice is hauling the rubber waste hundreds of miles for shredding
to turn it into tire derived fuel (TDF), and subsequently transporting the TDF
to combustion markets. As a result of positioning the ARC facility in the
communities where the waste is generated, the environmental impact associated
with trucking the waste rubber, as well as highway wear and tear are minimized.
The transportation of the waste also consumes diesel fuel, a non-renewable
resource. A community based ARC facility is a cost effective and environmentally
friendly alternative to current disposal options. Furthermore, EPA and State
initiatives to encourage States to take responsibility for the waste they
generate has once again commanded public attention as a result of, for example,
Toronto (Canada) garbage being trucked to Michigan.
Large
urban centers usually require enormous amounts of electrical energy, and via our
ARC Centers, we will be able to provide another source for electrical energy.
Community-based ARC installations will be positioned to address the growing need
for reliable energy sources with the added benefit of providing a final point of
disposition for rubber waste.
The total
improvement and equipment cost for installation and start-up for first
installation is estimated to be $18,000,000, with the overall capital budget of
$20,000,000.
ONE STEP MANUFACTURING
PROCESS
Our
thermal system has the ability to thermally reduce the rubber waste, utilize the
light aromatic volatile gases produced during the reduction/conversion process
as fuel for the conversion furnace and separates out the oil which is ultimately
used as fuel for the reciprocating engines generating electricity. As the
furnace (process reactor vessel) process is based upon the chemistry and
operational parameters utilized in the carbon black industry, a portion of the
oil is burned in the process fuel gases. Similar to the operation of carbon
black processing furnaces (process reactor vessels) the automated system
controls maintain optimum thermal conditions (process time, temperature and
turbulence) for combustion of the oil. The combustion generates more heat to
support the overall process and leaves behind a small particle of a black soot
like substance called carbon black which is carried away in the exhaust flow
where it is ultimately separated from the exhaust in a bag house (filter),
collected, pneumatically conveyed, palletized and sent to a storage silo. The
rubber, which is not pretreated or shredded (whole tires can be utilized) is fed
continuously into the furnace (process reactor vessel) and the thermal reaction
is maintained by the automated control system. During the reduction (conversion)
of the rubber to oil process, the steel contained in particularly waste tires,
is collected and conveyed hydraulically through the process to and exists the
process, where it is cooled, baled and stored.
All of
the aforementioned thermal reduction and occurs almost contemporaneously within
the process furnace (process reactor vessel) and ancillary equipment associated
with its operation. The Alliance thermal system is not based upon conventional
pyrolysis.
Almost
all current thermal operations are based upon the utilization of a pyrolytic
reaction. In simple terms the pyrolytic oven bakes rubber down into a
homogeneous mass which requires secondary processes to separate out the various
materials left behind in the reduction process. Additionally, the reduction is
at an extremely low temperature that does not generate carbon black. There is
tremendous amount of ash generated in the process that combines with the carbon
char. In order to separate the char from the ash additional processes are
required. Furthermore, additional high temperature processes are necessary to
upgrade the char to a marketable form of carbon black as there are extremely
limited markets for char. These additional process require additional fuel
making the entire process marginal from a financial perspective. Additionally,
the rubber waste in the majority of operation requires shredding and often the
removal of the steel in the rubber prior to shredding. All of above process are
required by most pyrolytic systems that management and their consulting
engineers are aware of at this time. There may be new types of systems developed
that are based upon the pyrolytic model, however it is management’s opinion that
the costs associated with numerous steps involved will make it difficult, if not
impossible for these type of systems to operate commercially. The costs
associated in the separation of the various products collected from the
homogeneous mass from the process reaction, in addition to the secondary
processing requirement of the char to allow it to be sold commercially, have
made pyrolysis based thermal processes marginal commercial successes. To further
exacerbate the overall high processing costs are the additional costs associated
with the pre-treatment of the rubber being conveyed into the pyrolysis oven.
Generally, the pre-treatment requires the shedding of the rubber waste and
frequently in the case of waste tires requires the removal of the tire bead wire
either by mechanical processes or a magnetic system.
Alternatively,
the Alliance thermal system requires no pre-treatment of the rubber waste. Whole
tires can be conveyed into the system thereby eliminating all costs associated
with the handling shredding, and shred storage of the rubber waste prior to
thermal processing. Furthermore, the chemical manufacturing process utilized in
the Alliance process, separates the various residual products as they are formed
and released into the system eliminating the need for additional process
separation systems. It is management’s and their third party consulting
engineers, Resource International, opinion that the simplicity of the Alliance
thermal system makes it a cost effective alternative to conventional pyrolysis
operations.
PRODUCT
DISTRIBUTION
Our
future Vice President of Marketing working in conjunction with our future Vice
President of Technology will also develop and implement campaigns related to the
sale of our various byproducts. A targeted marketing campaign pertaining to the
sale of carbon black and scrap steel will also commence prior to completion of
construction. However, we may not be positioned to enter into carbon black
supply contracts until such time as samples are made available from the
operation of the showcase facility. It is likely that these samples would be
made available as a result of operation the processing equipment during the
performance testing phase of the installation and immediately prior to
commercial certification. The commercial certification will occur after the
equipment has operated for a period of approximately 90 days and all contract
performance specifications have been achieved. There may be delays associated
with the correction of deficiencies in order that the processing equipment meet
certain performance standards prior to commercial certification. However, the
Company has included the 90 day start-up phase within the overall timeline to
allow for the correction of deficiencies by fabricator suppliers. Although
the vast majority of the rubber to oil system is based upon off-the-shelf
components, if further delays occur as a result of fabricator suppliers
correction of deficiencies, the Company could be delayed in its ability to
generate revenue.
Although
we have identified several experts currently responsible for the sale of carbon
products currently with other companies and they have expressed an interest in
the position of Vice President Marketing, there is no guarantee that their
previous experience will allow them to successfully initiate a campaign that
will lead to the sale of our carbon black. However, the successful operation of
the thermal system will generate commercial grades of carbon black that could be
utilized by rubber formulation companies for specific products. Additionally,
our carbon black could be blended with other sources of carbon black thereby
allowing rubber formulators to meet customer’s requirements for recycled
content. Alliance carbon black is advantageous to other forms of recycle content
as it is a virgin product made from oil that is a waste rubber
derivative.
The sale
of steam and/or hot water will occur as a result of a marketing effort to
identify and enter into discussions with an existing hydroponics greenhouse
operator that desires to enter into a relationship with us to move into specific
jurisdiction where ARC facilities will be located immediately in, or adjacent to
large metropolitan centers. Management discussions with several greenhouse
operators suggests that in addition to the availability of discounted heat from
us, hydroponics greenhouse operators like to distribute product from operations
that are positioned adjacent to large markets. Although we have yet to complete
an agreement with a hydroponics greenhouse operator, preliminary discussions
with several current operators would indicate that the availability of a
reliable discounted heat source for the production of hot water could be a cost
effective alternative to their current consumption of non-renewable resources to
fuel boilers to generate the required hot water.
PROCESS OF TIRE DERIVED
FUEL
At the
present time, shredding tires removes the hollow donut shaped tire from the
environment which in many jurisdiction is considered public health risk. Waste
tires, when left in dumps or collected out of doors collect water. The sun heats
the tire and water up in the daytime hours and the density of the rubber holds
some of the heat at night. As a result the water in the waste tires becomes an
ideal breeding ground for mosquitoes. There remains an extreme public health
concern pertaining to diseases carried by mosquitoes. When waste tires are
stored near urban areas they become a public health concern thereby making it
necessary for waste operators to shred the tire so water cannot be collected. As
a result, a significant investment has been made by these operators in shredders
to support their operations. The cost of maintaining and operating the shredder
appears to be significant. Management believes that the cost of shredding each
tire can in some jurisdiction be equivalent to the disposal fee making it
necessary for operators to rely on the sale of tire derived fuel to sustain
their economic viability. However, our consulting engineers have advised us that
in almost all jurisdictions in the United States the blending of TDF with coal
or other fuels is limited to 10-15 % of total fuel consumed. Our consulting
engineers have also advised Management that to dispose of shredded rubber,
shreds are now being mixed with soil used to top dress municipal waste sites.
Obviously, once mixed with soil at a landfill site, the oil resource in the
rubber waste is no longer recoverable.
The fuel
in TDF is simply as a result of the combustion (burning) of the rubber.
Catastrophic tire fires that have occurred in the US and around the world have
clearly demonstrated that rubber can burn and generate vast amounts of heat as a
result. As the rubber is consumed in the fire, it releases both oil and gases
that are highly volatile making the rubber a good fuel. However, as also
witnessed in tire uncontrolled fires, a tremendous amount of black soot, gases
and ash are released into the atmosphere. It is the material that is ultimately
released into the atmosphere that limits the amount of rubber that can be
blended with other fuels. Exhaust scrubbing systems intended for a specific fuel
are easily overloaded with the emissions from the burning of TDF.
It will
be necessary for management to carefully examine the disposal methods being
utilized in a jurisdiction, including TDF production, prior to committing to a
particular site. The cost associated with breaking into a market that has
invested in shredding could be significant.
RESEARCH AND
DEVELOPMENT
The
entire research and development effort has been supported by Mr. Vaisler
& his family prior to our incorporation. It commenced over 9 years ago. The
Company has not estimated the total number of hours of R&D
activity pertaining to the development of our business and technology.
Furthermore, we have also relied on the R&D of other groups to augment our
overall R&D efforts with off-the-shelf technology and processes that are
currently commercially available.
FINANCING
We will
need to complete a $20,000,000 financing (private placement of debt/equity) in
order to construct the first facility.
To serve
this end, on May 29, 2007, we entered into an Investment Agreement with Dutchess
Private Equities Fund, Ltd. (the “Investor”). Pursuant to this
Agreement, the Investor shall commit to purchase up to $20,000,000 of our common
stock over the course of thirty-six (36) months. The amount that we
shall be entitled to request from each purchase (“Puts”) shall be equal to, at
our election, either (i) up to $250,000 or (ii) 200% of the average daily volume
(U.S. market only) of the common stock for the three (3) trading days prior to
the applicable put notice date, multiplied by the average of the three (3) daily
closing bid prices immediately preceding the put date. The put date shall be the
date that the Investor receives a put notice of a draw down by us. The purchase
price shall be set at ninety-three percent (94%) of the lowest closing bid price
of the common stock during the pricing period. The pricing period shall be the
five (5) consecutive trading days immediately after the put notice date. There
are put restrictions applied on days between the put date and the closing date
with respect to that particular Put. During this time, we shall not be entitled
to deliver another put notice. Further, we shall reserve the right to
withdraw that portion of the Put that is below seventy-five percent (75%) of the
lowest closing bid prices for the 10-trading day period immediately preceding
each put notice.
EXPANSION
Our focus
is to turn environmentally friendly waste to energy, and also sell them as
carbon black and similar product byproducts. As a result of the readily
available fuel source in specific areas, expansion will be targeted toward
high-density population areas in the U.S. where scrap rubber generation and a
disposal infrastructure already exists. ARC Facilities will provide the needed
point of disposition for scrap rubber disposal within a community’s industrial
areas. Within these communities there currently exists a disposal infrastructure
including retailers, waste haulers and disposal companies, tire jockeys and
recyclers, truck and industrial re-treaders, and independent truckers and
trucking companies, which could benefit from the availability of a nearby point
of final disposition for rubber waste. Points of final disposition are not
usually found in or immediately adjacent to large urban centers.
Our
expansion into these high-density population areas in the U.S. will position us
as a convenient and cost effective alternative to the customary practice of
hauling the waste rubber long distances to permitted disposal sites. Extensive
public education campaigns will be targeted at these urban centers to raise the
level of awareness pertaining to responsible disposal of rubber waste by having
communities become a part of the “environmental alliance”. Awareness campaigns
involving the public, retailers, state legislators and regulators will be
utilized to market ARC installations as a final point of disposition for rubber
waste within communities (target locations) where the waste is
generated.
Based
upon the first facility, each ARC Unit’s disposal capacity will be capable of
processing 100,000,000 pounds of waste rubber annually. This is equivalent to
approximately 5,000,000 passenger tires. Normally, within the industrial makeup
of these communities, there are numerous industries requiring the carbon black,
steel and steam and/or hot water available from our processing system.
Discussions with a greenhouse operator have commenced to locate hydroponics
operations immediately adjacent to ARC installations. ARC will provide the
hydroponics operations with heat recovered from the overall ARC process thereby
minimizing any contribution to global warming. In the simplest of terms, the
hydroponics green house acts like a radiator for the reciprocating engines
making electricity, as well as acting as the radiator for the rubber to oil
conversion process. ARC installations will provide required disposal
infrastructure to select urban areas where large volumes of scrap rubber are
generated and there are few, if any, points of final disposition for this waste.
The obvious benefit to these urban centers is the minimization of transportation
pertaining to disposal and the additional positive environmental impact
associated with community based disposal and the production of electrical energy
to meet soaring demands without the consumption of non-renew
resources.
The
Rubber Manufacturers Association suggests that in their report, US Scrap Tire
Markets, 2003 edition, that as many as 290 Million tires are disposed of every
year in the US. That is approximately one tire for every man, woman and child in
the US today. We plan on locating on a site with access to the Great Lakes, so
that in the event sufficient tires were not immediately available from the
immediate jurisdiction surrounding the installation, marketing efforts could
extend to other states connected to the Great Lake system. The densely populated
areas on the southern shores of these lakes, referred to as the “rust belt” and
Ontario to the north could all support an ARC installation on their own. The
populations of the entire area are as follows:
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Michigan
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10,050,446
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Ohio
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11,421,267
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New
York
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19,157,532
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Pennsylvania
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12,335,091
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Ontario
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12,439,800
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PRODUCT, MARKETS &
SERVICES
The North
American carbon black consumption is approximately six (6) billion pounds
annually, and the global consumption of carbon black is approximately 17.2
billion pounds annually. Our energy and carbon black process innovation provides
a technically and economically viable industrial solution to waste rubber
disposal which is a major global environmental issue in the U.S. and
internationally.
We will
generate electrical energy for regional use and supply 700 series carbon black
to the rubber formulation and product industry. Carbon black can also be blended
with the product of larger manufacturers of carbon black to facilitate EPA and
state environmental “efforts” to include scrap rubber derivatives in new rubber
formulations. According to the technical representatives of ITRN, a manufacturer
of rubber formulations, customers are now demanding as much as 25% recycled
content in rubber compounds. The use of carbon black manufactured from a
feedstock oil derivative from waste rubber, does not impact upon the overall
quality of the rubber ultimately produced. According to ITRN technical
representatives, there are significant quality issues related to the use of
recycled crumb rubber in rubber formulations they produce. At present,
approximately 95% of the US carbon black market is controlled by five (5)
manufacturers.
The ARC
Process will have the capacity to manufacture up to 14,000,000 lbs. of carbon
black annually from the rubber-to fuel oil conversion processes. This represents
only a fraction of carbon black consumed in the growing U.S. market. In addition
to the production of carbon black, the thermal reduction of rubber in the
process system will also generate quality additional residual by-products. As
well as the production of gases which are used as fuel in the process,
approximately 90,000 barrels of No. 4 grade fuel oil for energy production and
2,300 tons of scrap steel are generated annually, which all contribute to our
projected profitability. Carbon black and steel are products that can be sold
into existing domestic and international markets.
The
addition of oil burning reciprocating engines to make electricity is a natural
addition to the ARC process and will provide an additional $3,000,000 in net
revenues for us. By consuming the oil generated in the process, the facility is
capable of generating electrical energy with a baseload of 8 MW. Thus, by
recovering the oil and gases from thermally decomposed waste rubber and
producing 14,000,000 pounds of carbon black annually, this technology will be
saving the oil and gas non-renewable resources needed to produce an equivalent
amount of carbon black from a conventional manufacturing process while also
using the surplus fuel oil to make electricity. We are also prepared to operate
the electrical generation capacity as a peaker, supplying electricity during
peak usage periods at prices that can be three to four times the basic rates.
The entire electrical generation business component will be managed by an
electrical utility company ultimately contracted to operate our generation
capacity.
To
determine the revenue potential from the sale of electricity, we have considered
current electrical rates offered by Detroit Edison. Detroit Edison rates for
residential and commercial consumption range from $ .08286/kwh to $ .09696/kwh.
In discussions with various operations and management companies, we were advised
that the wholesale rate of baseload in Michigan is $0.0656/kwh. Total revenue is
calculated as follows:
|
-
|
8000kwh
x 24 hours = 192000kwh/Day
|
|
-
|
192,000kwh/Day
x 325 Days/year = 62,400,000kwh/Year
|
|
-
|
62,400,000kwh/Year
x $0.0656/kwh = $4,093,440/Year
|
Although
there are no final agreements in place, during discussions with contract
operators and management companies, we were advised that payment for their
services to operate the entire electrical generation facility as well as to sell
the electricity is up to $0.01kwh.
62,400,000kwh/Year
x $0.01/kwh = $624,000
Based on
the above, annual net revenues of $3,469,440 can be anticipated.
We have
rounded the net revenue figure down to $3,000,000
Environmental
Impacts of Products and Production Processes
Our
ability to manufacture a new product from a scrap rubber derivative (fuel oil),
in a conventional and environmentally friendly manner is an extremely attractive
alternative to current recycling approaches which are simply not capable of
dealing with the annually generated volume of rubber waste in the U.S. in a
feasible or environmentally friendly way. Many of these efforts simply change
the shape of the problem into a consumer product that is ultimately disposed of
at conventional dump sites.
In an
attempt to generate opportunities to utilize waste rubber, like scrap tires, in
various new products which include rubber shreds, go into jogging mats, mud
flaps, stable mats, pickup bed liners, and many similar products. Ultimately,
however, these consumer goods will be disposed of in a landfill. The donut shape
of the tire has been changed, but the problems associated with appropriately
disposing of the waste remains. Rubber products in landfills cannot be
recovered, thereby making it impossible to recover the hydrocarbon resource
available in the waste rubber.
Steel
recovered from the thermal reduction/conversion process is ultimately put into
new steel products. Most metals today are recycled, so it is highly unlikely
that the recovered steel would ever find its way into a landfill. The ARC
process results in the total consumption of rubber waste. The marketable
by-products include electrical energy, carbon black, steel, thermal energy/hot
water, none of which results in rubber landfill, and all of which are, in fact,
recyclable consumer goods.
The ARC
manufacturing process does not qualify as a federally regulated source of
emissions. Only state and local approvals are required. ARC’s ability to permit
facilities in large urban centers will allow the Company to establish a network
of facilities in communities where rubber waste is generated rather than hauling
this waste hundreds of miles for shredding to TDF and subsequently
transporting the TDF to combustion markets, perhaps close to the communities
where the tires originated.
Furthermore,
markets for the sale of the commodity like products we generate also exists
within large metropolitan communities that we target for subsequent plant
installations. The aforementioned business provides us an industrial solution to
a major environmental problem. In addition, the availability of power generation
equipment can be leveraged and will permit ARC to offer energy solutions based
upon resource recovery. Availability of reliable sources of electricity has come
to the forefront of public concern, as a result of the State of California
energy crisis in the winter of 2001 and industry de-regulation in the U.S. and
Canada.
We
believe that our emissions will be well below the Federal Guidelines. As such we
believe that we will not be a federally- regulated source of emissions. Based on
previous process studies, the ARC Process to produce oil, carbon black, and
steel from used tires is not expected to create emissions of a quantity and type
that will be large enough to trigger a Federally-mandated Title V “Renewable
Operating Permit.” The Michigan state-required “Permit to Install/New Source
Review” program will require that a state-issued permit be applied
for.
The
electric generating process utilizing the produced oil in engine-driven
generators may fall within other regulatory guidelines that require additional
permitting measures such as a “Renewable Operating Permit,” whether or not the
emissions are above certain thresholds. Requirements for such permits depend on
certain factors unrelated to emissions limits, such as the percentage sulfur
content in the oil, the rated capacity of the generator, or whether the
electricity is sold publicly. Also, certain guidelines regarding Nitrogen and
Sulfur oxides and overall emissions from electric generating facilities are
federally mandated, but are implemented through state regulations. Therefore,
the state would issue such a permit, if one is needed. Certain of these
guidelines relate to “fossil-fueled” generators, but it is not yet established
whether the state would consider the tire-derived oil to be “fossil.” It may be
noted that the emissions regulations regarding such electrical generating
facilities are yet evolving, with changes as recent as 2004.
Typically,
states and/or localities regulate employee relations, zoning, noise, aesthetics,
lighting, parking, fencing, signs, odors, fire prevention devices, nuisances,
roadway access, plumbing, electrical, and other building codes. These types of
regulations may require specific design attributes for the site, building, and
equipment. There are no known special regulations at this site that would create
abnormal difficulties over and above those encountered in the development of any
other industrial site and have been anticipated in the budgets that have been
prepared.
We also
have to meet the following federal regulations:
|
a.
|
The
facility would have to meet OSHA-mandated safety guidelines, and
EPA-mandated Storm Water runoff guidelines. These programs are implemented
by the State of Michigan and are typically required for all industrial
and/or commercial operations that meet the reporting
guidelines.
|
|
|
|
|
b.
|
If
the facility discharges process water into a local sewer system, it will
need to meet any pretreatment guidelines established by the
locality.
|
|
|
|
|
c.
|
The
only Federally-implemented discharge program known to apply is the
(40CFR112) Oil Pollution Prevention and Response regulations, which
require most oil storage facilities to be constructed to good engineering
practice, including dikes, and to have a Spill Prevention Control and
Countermeasures (SPCC) Plan.
|
|
|
|
|
d.
|
It
is currently unknown what, if any, impact that evolving Homeland Security
actions and guidelines would impose on industrial operations such as ARC
proposes to build and operate.
|
The
Industry
ARC
installations will provide a final point of disposition for waste rubber either
in, or immediately adjacent to, the communities where the waste was generated.
Generally, the U.S. waste industry is not prepared to address the problems
associated with specific kinds of waste rubber and particularly scrap tires. The
carbon black industry has manufactured carbon black for 80 years by burning a
fuel oil. Industry estimates indicate that approximately 7 billion pounds of
carbon black are consumed in the U.S. each year with global consumption at 17
billion pounds. Carbon black manufactured by us will be sold into existing U.S.
and international carbon black markets and be produced as a result of the
thermal reduction of rubber waste to fuel oil, the oil thereby being the
feedstock for carbon black production. The surplus fuel oil can be used to fuel
generators to make electrical energy. We will be uniquely positioned in several
industries: rubber waste disposal, manufacturing, and power
generation.
As rubber
waste is the source of fuel oil, it is important to understand the waste
industry as it relates to scrap tire disposal which will constitute a
significant volume of the waste rubber processed at an ARC installation. Scrap
tires are a major environmental problem. It is estimated by the United States
Environmental Protection Agency (the “EPA”) that there are over 1.5 to 3 billion
used tires in landfills and stockpiles in the United States and that an
additional 292 million tires are discarded in the United States every year.
“Disposing” of tires by stockpiling is not a viable long-term solution because
of fire hazards and the likelihood of spreading disease. “Disposing” of whole
tires in landfills is, generally, prohibited or restricted by
regulation.
Scrap Tire Distribution
Chain
In
general, the scrap tire distribution chain consists of the tire end-user
(business or consumer), new tire retailers, used tire brokers, solid waste
disposal companies, haulers and tire processors. Most scrap tires are originally
obtained by new tire retailers from consumers who may pay the retailer a fee for
“disposing” of their used tires. Retailers may pay either a scrap tire broker, a
solid waste disposal company, a hauler or a tire processor to remove scrap tires
from their place of business. Scrap tire brokers typically retain some tires for
resale as used tires and pay either a waste disposal company, a hauler or a tire
processor to remove the remaining scrap tires from their place of business.
Solid waste disposal companies may stockpile scrap tires or pay a processor to
dispose of their tires. Haulers transport scrap tires between parties in the
distribution chain and may also act as a used tire broker or other party in the
distribution chain. Not until a tire processor processes the scrap tires are the
tires ultimately disposed of.
Our products and services
include:
Tipping
Fees
The fees
paid by those who have scrap tires for their ultimate disposal are referred to
as tipping fees. Tipping fees will be an important source of revenue for
Alliance. As of May, 1991, 21 states had special fees for tires or vehicles.
Some states have enacted legislation which directly mandates the payment of
tipping fees. Other states have implemented programs which make funds available
for the payment of tipping fees. For instance, some states raise funds, through
retail taxes on purchases of new tires or through annual motor vehicle license
fees, which are specifically allocated to the disposal of tires. These states
often bear the responsibility for disposing of tires directly and use the funds
raised from the net proceeds of the particular program to pay for such disposal.
Other states provide for a tax to be paid by purchasers of new tires, to be
retained by the retailer selling the tire, who must in turn pay for the disposal
of such scrap tires. Other states rely on the market to regulate tipping fees.
We estimate that in large urban cities, average tipping fees could be as much as
U.S. $3.00 to $5.00 per tire. In our financial projection, we have budgeted
tipping fees at U.S. $0.85 per tire.
While
determining the ideal jurisdictions for ARC installations, it was concluded that
locating an ARC facility as close as possible to where the rubber waste is
generated had a significant positive impact on the environment as it would
greatly reduce the requirement to transport the waste, often several hundred
miles, to a facility for sorting and some form of processing prior to final
disposition. The emissions associated with transportation of the rubber waste as
well as wear and tear on the roadways as well as the cost of transportation all
negatively impact the vast majority of current rubber waste disposal scenarios.
Rubber waste is generated where people live. As a result, large metropolitan
centers generate vast quantities of rubber waste that generally requires some
form of truck transportation prior to final disposition. The costs associated
with collection, sorting, transportation and final disposition are
significant.
Our
examination of these larger metropolitan jurisdictions included discussions with
retail operators. As an example, in the cities of New York & Baltimore and
their surrounding communities, retail operators were charging purchasers of new
tires $3.00 to $5.00 /tire as a disposal fee. The vast majority of those
retailers charged $5.00/tire for a passenger tire equivalent (PTE). A passenger
tire equivalent is approximately twenty (2) pounds and the disposal fee
nationwide is based upon PTEs. Larger light truck, heavy truck and off-road
vehicle tires are charged significantly more as a result of their size, weight
and conveyance characteristics. Obviously, a larger off-road tire, weighing
several hundred pounds is extremely difficult to handle and convey.
Within
the large metropolitan centers there exists a disposal infrastructure currently
servicing the retailers. This infrastructure of truckers, waste operators and
small independents routinely travel to retailers to pickup waste tires.
Retailers pay a disposal fee to have the waste tires removed and transported. A
portion of the disposal fee pays for conveyance and the balance covers the
ultimate disposition of the waste tire.
Although
we recognize that disposal fees charged by scrap tire collectors at final points
of disposition are significantly higher than $.85, management has deliberately
been extremely conservative in projecting incomes based upon the $.85/PTE for
final disposition. Furthermore, management believes that a lower fee will
encourage the existing disposal infrastructure to utilize an ARC facility’s
capacity either in or immediately adjacent to a large metropolitan center rather
than the current practice of hauling the waste often several hundred miles, or
in some cases, to out-of-state disposal operations.
Sale
of the Recovered Steel
Approximately
one pound of steel can be recovered from each scrap passenger tire. Scrap steel
can be used as an input into carbon steel manufactured by steel mills. A recent
expansion of the number of small-scale “mini” mills catering to local markets
has increased local demand for scrap steel. Scrap steel is also sold into export
markets, notably Japan. International demand for United States scrap steel has
had a positive impact on the demand for and price of scrap steel. Although the
U.S. steel industry is in decline, demand for scrap steel remains significant
with regional prices varying from U.S. $65.00 to $124.00 per ton. In our
financial projections, the realizable price for scrap steel produced was
budgeted at U.S. $65.00 per ton. Based on inputs of 4,600,000 tires annually,
each ARC Unit will be designed to produce approximately 2,300 tons of scrap
steel per year.
Sale
of the Manufactured Carbon Black
As the
rubber is thermally reduced to fuel oil, approximately 14 million pounds of
commercial grade carbon black is expected to be manufactured. Carbon black can
be sold to industry for reuse as a re-enforcing agent in synthetic rubber
compounds for inks, paints, plastics, radiator hoses, fan belts, trim rubber,
floor mats, etc. Because the principal use of carbon black is as a raw material
in automotive parts, demand for carbon black is dependent on the automotive
industry. Also, since carbon black is derived from petrochemical products, its
price is susceptible to variations in the price of oil. According to the
Business Intelligence Center report at Reed Business Information as of 12/31/04
the US national average for Carbon Black was $.45/lb The manufactured price of
carbon black is directly related to the price of a barrel of oil. In our
financial projections, the realizable price for carbon black produced was
budgeted at U.S. $0.22 per pound. Based on inputs of 4.6 Million tires annually,
each ARC Unit is designated to produce approximately 14 million pounds of carbon
black per year.
The
thermal conversion chemistry maintained within the manufacturing furnace of the
ARC unit, is based upon existing manufacturing methods utilized by conventional
carbon black manufacturers. This chemistry has been utilized for approximately
80 years in carbon black manufacturing facilities around the world. By
controlling the time, temperature and turbulence within the furnace, commercial
grades of carbon black can be produced.
Based
upon the amount of oil generated by each PTE, management and their engineering
consultants after examining conventional carbon black manufacturing methods and
chemical reactions believe that the least amount of carbon black that could be
generated is approximately 3 pounds. For the purpose of understanding this
projection consider that each hour 1800 pounds of carbon black are generated
utilizing the aforementioned carbon black manufacturing conditions maintained in
the process furnace. To continue being conservative in this projection it has
been determined that the total number of hours the ARC facility will operate in
1 year is equivalent to 325 days. Similar to other carbon black or thermal
processing manufacturing facilities, the ARC facility will be operated 24
hours/day producing 14,040,000 of carbon black annually
(1800x24x325=14,040,000).
Sale
of Steam and/or Hot Water
Steam
and/or hot water can be sold to industry or greenhouse operators at the avoided
cost.
We have
had discussions with hydroponics greenhouse operators pertaining to a
co-location of a greenhouse immediately adjacent to the Alliance showcase
installation. Hydroponics greenhouses require vast amounts of hot water which is
generally generated from the consumption of natural gas or fuel oil that fuel
boilers within the greenhouse complex.
An ARC
installation has the ability to recover heat from both the rubber to oil
conversion and the generation of electricity. Several of the turn-key electrical
generation systems identified by us are equipped with standard heat recovery
technology capable of producing steam and/or hot water. The heat recovery
equipment can be utilized to produce steam and/or heat hot water or can also
heat an oil product. Ultimately, the distance from the greenhouse operation
determines whether one uses hot water, steam or oil. Hot oil can retain heat
longer and can be sent a greater distance than steam or hot water. The steam
and/or hot water or heated oil can be transferred in an insulated piped to the
adjacent greenhouse operation and subsequently put through a heat exchanger to
heat the hot water reservoir maintained at the hydroponics
operation.
The sale
of heat to the greenhouse operator at their avoided cost of production less an
appropriate discount can provide an additional source of revenue, although we
have not factored revenues from the sale of heat into the Financial
Projections.
INTELLECTUAL
PROPERTY
The
necessary technology that is required for our operation is presently owned by
Peter Vaisler. While employed by us, Mr. Vaisler will provide us with such
technology at no cost to us until the end of his employment term. In the event
Mr. Vaisler is no longer employed by us, the technology that he has
provided to us may be used by us for a one time fee equal to the current
replacement value of such technology determined by an engineer’s opinion
acceptable to both parties.
We may
terminate Mr. Vaisler’s employment agreement for “cause.” Either party may
terminate the employment agreement with thirty (30) days prior written notice to
the other party.
As a
result of discussions with patent attorneys, we believe that the rubber to oil
system components may be patentably distinct. However, we have also been advised
to treat the main rubber to oil system components as a “black box” and to seek
patent protection on both the feed side and exhaust side of the process furnace
immediately prior to going from final fabrication design to actual equipment
fabrication. As a result of secrecy agreements with our consulting engineers and
the overall system engineering team, all intellectual property developed as a
result of their efforts is our property. In any event, if we should not proceed
with patent protection or not be able to obtain patent protection; it is highly
unlikely that our business would be negatively impacted. The length of time it
would take a competitor to replicate and integrate the various system components
would be lengthy. Raising the capital required to develop a competitive system
would also be a lengthy process. During that period, we would have already
established ourselves in targeted markets.
We
presently have no copyrights, patents or trademarks.
EMPLOYEES
During
the fiscal year ended December 31, 2007, we had no employees. Upon receiving
funding for our initial facility, Peter Vaisler will become our first full-time
employee. We have no other firm commitments for employment but it is
expected that subsequent to Mr. Vaisler’s employment, 6 key management, and
support positions, will be filled to address financial, business, construction,
and regulatory matters. In addition at our first operating subsidiary
installation, we expect to employ approximately 25 people on a full-time basis.
We will employ additional people as we continue to implement our plan of
operation. This will be undertaken as follows:
We will
operate processing facilities as subsidiaries. Each subsidiary will be required
to have the following full time employees:
|
General
Manager
|
|
$
|
95,000
|
|
|
Secretary
|
|
$
|
40,000
|
|
|
Bookkeeper
|
|
$
|
35,000
|
|
|
3
Shift Supervisor/System Operators
|
|
$
|
165,000
|
|
|
6
Machinery Operators
|
|
$
|
240,000
|
|
|
6
Production/Packaging
|
|
$
|
180,000
|
|
|
3
Maintenance Mechanics
|
|
$
|
120,000
|
|
We
estimate that benefits will equal 20% of expected salaries. Such
salary and benefit estimations are incorporated into our Valuation Report
projections.
Although
the management team will be augmented by specific consultants to address
technical, compliance and engineering issues, the ARC corporate offices will
require a management team to support the installation, start-up, operations,
sales of disposal services, product sales, and finance of the initial showcase
facility and any subsequent installations, in addition to all corporate matters
including regulatory and compliance issues.
Our
President and CEO will initially augment our management team with a CFO/Business
Manager. Reporting to the President, the CFO/Business Manager will be
responsible for corporate finances, regulatory and compliance matters and the
overall day-to-day management of the corporate offices. Initially, the corporate
offices will be located at the showcase installation as a matter of convenience.
The entire management team will be focused on the equipment fabrication and
installation, start-up, and operations of the showcase facility. At this time,
an Executive Secretary will join the management team to assist both the
President and CEO and the CFO/Business Manager. The next additions to the
management team are VP Technology and VP Marketing. Reporting to the President,
the VP Technology having a background in a hydrocarbon related industry and the
manufacturing of carbon products will head up the engineering team responsible
for the completion of all system design, fabrication, installation, site
development, software development, procurement and contract management. The VP
Technology will coordinate our engineering team of consultants and will work
closely with the CFO/Business Manager to implement accounting policies and
controls pertaining to the development and operations of the subsidiary showcase
facility. The VP Marketing will be responsible for the development and
implementation of a marketing campaign pertaining to the sale of disposal
services to the existing infrastructure within the jurisdiction. The VP
Marketing working in conjunction with the VP Technology will also develop and
implement campaigns related to the sale of our various byproducts. In addition
to the President and CEO, the corporate office staff during the construction and
installation process shall be as follows:
CFO/Business
Manager - $100,000; VP Technology - $85,000; VP Marketing - $85,000; and
Executive Secretary - $40,000
Item 2.
Description of
Property
As of
December 31, 2007 we did not own or lease any property. Our President, Mr.
Vaisler used various offices including his home office, directors’ offices, and
the offices of legal counsel at no cost to us.
As of
April 8, 2008, the Company’s corporate offices are now located at 1000 N.W.,
St., Suite 1200, Wilmington, DE, 19801. We pay $300.00 in rent
per month for a lease term that is on a month to month basis
However,
subsequent to the financing for the first facility, an office construction
trailer will be moved to the selected site and the corporate office functions
will be based there until such time as the showcase installation offices are
complete. Upon completion of the showcase facility’s offices, the corporate
offices will be moved into the office area until such time as the facility is
fully operational.
Item 3.
Legal Proceedings
We are
not presently a party to any litigation, nor to our knowledge and belief is any
litigation threatened or contemplated.
Item 4.
Submission of Matters to a Vote of
Security Holders
During
the fiscal year ended December 31, 2007, we did not present any matters for
approval by the affirmative vote of all shareholders.
Item 5.
Market for Common Equity and Related
Stockholder Matters
Public Market for Common
Stock
Our
common stock is currently traded on the OTC Bulletin Board under the symbol
“ARVY.” Our common stock has been quoted on the OTC Bulletin Board since
February 14, 2007. The following table sets forth the range of high
and low bid quotations for each quarter of the year ended December 31,
2007. These quotations as reported by the OTC Bulletin Board reflect
inter-dealer prices without retail mark-up, mark-down, or commissions and may
not necessarily represent actual transactions.
|
YEAR
|
QUARTER
|
|
HIGH
|
|
|
LOW
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
First
(February 14, 2007 thru March 31, 2007)
|
|
$
|
0.85
|
|
|
$
|
0.28
|
|
|
2007
|
Second
|
|
$
|
0.55
|
|
|
$
|
0.14
|
|
|
2007
|
Third
|
|
$
|
0.30
|
|
|
$
|
0.20
|
|
|
2007
|
Fourth
|
|
$
|
0.09
|
|
|
$
|
0.19
|
|
Holders
As of
April 7, 2008, we had approximately 100 shareholders of record. Such
shareholders of record held 20,589,425 shares of our common stock.
Dividends
Since
inception we have not paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock, when issued pursuant to this offering. Although we intend to retain our
earnings, if any, to finance the exploration and growth of our business, our
Board of Directors will have the discretion to declare and pay dividends in the
future.
Payment
of dividends in the future will depend upon our earnings, capital requirements,
and other factors, which our Board of Directors may deem relevant.
Recent Sales of Unregistered
Securities
On May
10, 2007 we issued 300,000 shares of our common stock to Mirador Consulting,
Inc. pursuant to a consulting agreement entered into March 5, 2007. These shares
were issued in reliance on the exemption under Section 4(2) of the Securities
Act of 1933, as amended (the “Act”). These shares of our common stock qualified
for exemption under Section 4(2) of the Securities Act of 1933 since the
issuance shares by us did not involve a public offering. The offering was not a
“public offering” as defined in Section 4(2) due to the insubstantial number of
persons involved in the deal, size of the offering, manner of the offering and
number of shares offered. We did not undertake an offering in which we sold a
high number of shares to a high number of investors. In addition, this
shareholder had the necessary investment intent as required by Section 4(2)
since they agreed to and received share certificates bearing a legend stating
that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act.
This restriction ensures that these shares would not be immediately
redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for this
transaction.
On July
21, 2006, we issued 136,669 shares of our common stock to the following
investors: Lewis Martin - 33,334 shares; James E. Schiebel - 33,334 shares;
Susan Hutchison - 3,334 shares; Walter Martin - 66,667 shares. The issuances
were valued at $1.50 per share or $205,000 in the aggregate. In addition, we
issued warrants to purchase an aggregate of 51,250 shares of our common stock to
the following investors: Lewis Martin - 12,500 shares; James E. Schiebel -
12,500 shares; Susan Hutchison - 1,250 shares; Walter Martin - 25,000 shares.
The warrants are exercisable within one year of issuance at a price per share of
$1.50. The shares and warrants were issued pursuant to the conversion of
outstanding notes held by the investors. Our securities were issued in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act of 1933. No commissions were paid for the issuance of such securities. All
of the above issuances of our securities qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such securities by us
did not involve a public offering. The above listed parties were sophisticated
investors and had access to information normally provided in a prospectus
regarding us. The offering was not a “public offering” as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of securities offered. We did
not undertake an offering in which we sold a high number of securities to a high
number of investors. In addition, the above listed parties had the necessary
investment intent as required by Section 4(2) since they agreed to and received
share certificates bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares and the shares underlying the warrants would not be immediately
redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for the
above transaction.
On June
28, 2006, we issued warrants to purchase 100,000 shares of our common stock
exercisable within one year of issuance at an exercise price of $1.50 per share
to David Williams. By order of a July 24, 2007 Board of Director’s
resolution, the warrants expiration date was extended to February 7,
2008. Our securities were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such securities. All of the above
issuances of our securities qualified for exemption under Section 4(2) of the
Securities Act of 1933 since the issuance of such securities by us did not
involve a public offering. The above listed parties were sophisticated investors
and had access to information normally provided in a prospectus regarding us.
The offering was not a “public offering” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of securities offered. We did not undertake an
offering in which we sold a high number of securities to a high number of
investors.
In
addition, the above listed parties had the necessary investment intent as
required by Section 4(2) since they agreed to and received share certificates
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares and the
shares underlying the warrants would not be immediately redistributed into the
market and therefore not be part of a “public offering.” Based on an analysis of
the above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above
transaction.
On
January 14, 2005, we issued 300,000 shares of our restricted common stock to
Mirador Consulting, Inc. for consulting services. The issuance was valued at
$.50 per share or $150,000. Our shares were issued in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Mirador Consulting, Inc. was a sophisticated
investor and had access to information normally provided in a prospectus
regarding us. The offering was not a “public offering” as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, Mirador Consulting, Inc. had the necessary investment
intent as required by Section 4(2) since it agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a “public offering.” Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
From
February 2005 through May 2005, we issued 183,000 shares of our restricted
common stock to the following parties for cash consideration of $1.00 per
share:
|
Name
of Subscriber
|
Units
Purchased
|
Date
of
Investment
|
Consideration
|
|
CARR,
BRIAN (1)
|
20,000
|
5/8/2005
|
$20,000
|
|
COPPLESTONE,
GLEN (2)
|
8,000
|
5/7/2005
|
$8,000
|
|
EAGEN,
MICHAEL J. (2)
|
5,000
|
4/22/2005
|
$5,000
|
|
KNECHT,
JOHN (3)
|
25,000
|
3/3/2005
|
$25,000
|
|
LEWIS,
JACQUELINE (4)
|
5,000
|
4/22/2005
|
$5,000
|
|
MARTIN,
LEWIS (1)
|
55,000
|
5/4/2005
|
$55,000
|
|
MILETICH,
MIKE (2)
|
5,000
|
4/22/2005
|
$5,000
|
|
ROBINSON,
ROD (1)
|
50,000
|
5/4/2005
|
$50,000
|
|
SHEA,
ROBERT JOHN (1)
|
10,000
|
2/15/2005
|
$10,000
|
|
(1)
|
Messrs. Carr,
Lewis, Robinson, and Shea are our present shareholders;
|
|
(2)
|
Messrs. Coppleston,
Eagen, and Miletich are personal friends of Mr. Vaisler, our officer
and director.
|
|
(3)
|
Mr. Knecht
is the father-in-law of Mr. Vaisler, our officer and
director;
|
|
(4)
|
Ms. Lewis
is related to Mr. Miletich.
|
The
issuances were valued at $1.00 per share or $183,000 in the aggregate. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. All of the above issuances of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public
offering.
The above
listed parties were sophisticated investors and had access to information
normally provided in a prospectus regarding us. The offering was not a “public
offering” as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, the above listed parties
had the necessary investment intent as required by Section 4(2) since they
agreed to and received a share certificate bearing a legend stating that such
shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These
restrictions ensure that these shares would not be immediately redistributed
into the market and therefore not be part of a “public offering.” Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act of 1933 for the above
transaction. All 183,000 shares issued during the period commencing March 2005
and ending May 2005 were subject to rescission as disclosed below.
As
disclosed above, an aggregate of 1,986,646 shares issued pursuant to private
offerings which took place during the periods commencing April 2002 and ending
June 2004 and commencing March 2005 and ending May 2005 were subject to
rescission. In November 2005 we concluded a rescission offer to investors who
purchased our securities during such periods. Such private offerings may have
violated federal securities laws based on the inadequacy of our disclosures made
in our private placement memoranda offering documents concerning the lack of
authorized common stock. Based on potential violations that may have occurred
under U.S. securities laws, we determined to make a rescission offer to all
investors who acquired our securities pursuant to our private offerings.
The
rescission offer was conducted privately in October 2005 and November 2005. If
all eligible investors had elected to accept the rescission offer, we would have
been required to refund investments totaling $1,084,823, plus interest on those
funds from the date of investment through the date of the acceptance of the
rescission offer at 6% per annum. None of the investors accepted the rescission
offer which expired on December 8, 2005.
From
January 2004 through June 2004, we issued 186,000 units consisting of one share
of restricted common stock and a warrant to purchase one share of our common
stock exercisable at $1.00 per share to the following parties for cash
consideration of $.50 per share: Lance Appleford - 10,000 units; Jodie Tonita -
6,000 units; Rod Robinson - 140,000 units; Jurek Gebczynski - 10,000 units; and
Jewan Naraine - 20,000 units. The issuances were valued at $.50 per share or
$93,000 in the aggregate. Our securities were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. No commissions were paid for the issuance of such securities. All of the
above issuances of our securities qualified for exemption under Section 4(2) of
the Securities Act of 1933 since the issuance of such securities by us did not
involve a public offering. The above listed parties were sophisticated investors
and had access to information normally provided in a prospectus regarding us.
The offering was not a “public offering” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of securities offered. We did not undertake an
offering in which we sold a high number of securities to a high number of
investors. In addition, the above listed parties had the necessary investment
intent as required by Section 4(2) since they agreed to and received share
certificates bearing a legend stating that such shares are restricted pursuant
to Rule 144 of the 1933 Securities Act. These restrictions ensure that these
shares and the shares underlying the warrants would not be immediately
redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for the
above transaction. All 186,000 shares issued during the period commencing
January 2004 and ending June 2004 were subject to rescission as disclosed
below.
On
January 14, 2004, we issued 200,000 shares of our restricted common stock and
warrants to purchase 200,000 shares of our common stock to Mirador Consulting,
Inc. for consulting services. The warrants are exercisable at the following
prices: 100,000 at $5.00 per share and 100,000 at $7.50 per share. The issuance
was valued at $.50 per unit or $100,000. The securities were issued in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act of 1933. No commissions were paid for the issuance of such securities. All
of the above issuances of our securities qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such securities by us
did not involve a public offering. Mirador Consulting, Inc. was a sophisticated
investor and had access to information normally provided in a prospectus
regarding us.
The
offering was not a “public offering” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of securities to a high number of
investors. In addition, Mirador Consulting, Inc. had the necessary investment
intent as required by Section 4(2) since it agreed to and received share
certificates bearing a legend stating that such shares are restricted pursuant
to Rule 144 of the 1933 Securities Act. These restrictions ensure that these
shares and shares underlying the warrants would not be immediately redistributed
into the market and therefore not be part of a “public offering.” Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act of 1933 for the above
transaction.
We did
not employ an underwriter in connection with the issuance of the securities
described above. We believe that the issuance of the foregoing securities was
exempt from registration under the Securities Act of 1933, as amended (the
“Securities Act”). Each of the purchasers was an accredited investor, and
acquired the securities for investment purposes only and not with a view to
distribution.
Stock Option
Grants
As of
April 15, 2008, no options to purchase our securities outstanding. We may in the
future establish an incentive stock option plan for our directors, employees and
consultants.
Equity Compensation Plan
Information
The
following table sets forth certain information as of April 15, 2008, with
respect to compensation plans under which our equity securities are authorized
for issuance:
|
|
|
(a)
|
(b)
|
(c)
|
|
|
|
_________________
|
_________________
|
_________________
|
|
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
|
|
|
|
|
|
Equity
compensation
|
None
|
|
|
|
|
Plans
approved by
|
|
|
|
|
|
Security
holders
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation
|
None
|
|
|
|
|
Plans
not approved
|
|
|
|
|
|
By
security holders
|
|
|
|
|
|
Total
|
|
|
|
Item 6.
Management’s Discussion of Financial
Condition and Results of Operations
The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of our financial condition. The
discussion should be read in conjunction with our financial statements and notes
thereto appearing in this prospectus. The following discussion and analysis
contains forward-looking statements, which involve risks and uncertainties. Our
actual results may differ significantly from the results, expectations and plans
discussed in these forward- looking statements.
Overview
We are a
developmental stage company that is in the process of implementing our business
plan to develop a showcase waste to energy facility at a site to be determined.
The first showcase installation will be the cornerstone for both United States
and European expansion. It will thermally convert rubber waste to oil and
subsequently use the oil as fuel for large reciprocating engines driving
alternators making electricity. In addition to the sale of electricity, several
additional valuable bi-products produced in the thermal conversion process will
also be sold into either domestic or international markets.
Our
business plan is focused on providing large urban centers with community based
processing facilities to address the needs of rubber waste disposal where the
waste is generated. This rubber waste is largely scrap tires. Similarly, large
urban centers also have an increasing requirement for electrical energy for both
domestic and industrial use. Our processing facilities can be located,
constructed and operated to meet the specific needs of the community in an
environmentally friendly manner.
We
believe that the effective implementation of our business plan will result in
our position as a provider of community based waste to energy installations
dealing with rubber waste at source while providing reliable electrical energy
to meet base load and/or on peak energy demands.
The
successful implementation of the business plan will also be dependent on our
ability to meet the challenges of developing a management team capable of not
only the construction and operation of the first installation but also marketing
management and the implementation of specific marketing strategies.
These
strategies will include the utilization of specific existing distributors
currently in the business of marketing carbon black. As well, we will be going
to regional disposal operators and collectors to offer our services as a point
of final disposition for their collection and disposal
requirements.
Additionally,
it will be necessary to educate targeted jurisdictions about the environmental
and commercial benefits of an Alliance installation in their
community.
During
the fiscal quarter December 31, 2007, no revenues were generated and we do not
anticipate revenues until such time as the first facility has been constructed
and commercially operated. The construction of the first showcase facility will
require $20 million. However, currently there are no commitments for capital and
furthermore, the successful implementation of all aspects of the business plan
is subject to our ability to complete the $20 million capitalization. It is
expected the required funds will be raised as a result of private offerings of
securities or debt, or other sources.
We
entered into a Consulting Agreement with Global Consulting Group, Inc (“Global
Consulting”) on September 9, 2007. The Consulting Agreement was
amended on September 17, 2007 and again on September 27,
2007. Pursuant to the Consulting Agreement, as amended, Global
Consulting will consult and advise the Company on matters pertaining to
corporate exposure/investor awareness, telephone marketing/advertising
campaigns, business modeling and development and the release of press
releases. More specifically, Global Consulting will contact 3,000
stockbrokers each month to create better awareness of the
Company. The Consulting Agreement, as amended, is for a commitment
period of four months from September 9, 2007, and requires payment from the
Company to Global Consulting on the commencement date of the Consulting
Agreement or shortly thereafter. Payment is defined as the issuance
of 278,000 of shares of the Company’s common stock to be issued to
Global Consulting.
To
satisfy the terms of the Amended Consulting Agreement, we issued 278,000 shares
of our common stock to Global Consulting on September 27, 2007. The
Consulting Agreement, as amended, may be terminated, without cause, by either
the Company or the Consultant with 30 day prior notice.
The
Consulting Agreement entered into with Global Consulting requires the issuance
of additional shares which will dilute the ownership held by our
shareholders. In particular, pursuant to the Consulting Agreement, as
amended, the Company has issued 278,000 shares of its common stock pursuant to
Global Consulting, which will further dilute the percentage ownership held by
the stockholders. On the other hand, however, the Consulting
Agreement entered into with Global Consulting could result in an increase in our
common stock’s bid price based on improvements to our corporate image,
marketing/advertising campaigns, and general business
development. The Consulting Agreement may also have a positive impact
on our ability to generate revenue, as improvement in general business
development could lead to new revenue generating opportunities.
Should
the required funding not be forthcoming from the aforementioned sources, public
offerings of equity, or securities convertible into equity may be necessary. In
any event, our investors should assume that any additional funding will cause
substantial dilution to current stockholders. In addition, we may not be able to
raise additional funds on favorable terms, if at all.
On
December 17, 2007, we entered into a Marketing Agreement (the “Marketing
Agreement”) with QualityStocks, LLC (“QualityStocks”). Pursuant to
the Marketing Agreement, QualityStocks, would assist with press release
drafting, prepare a Video Corporate Profile of Alliance Recovery Corporation,
include news and facts about Alliance Recovery Corporation within its monthly
newsletters, and hold a CEO interview with Alliance Recovery Corporation CEO
Peter Vaisler once each quarter.
The term
of the Marketing Agreement began December 10, 2007 and ends June 30,
2008. On March 26, 2008 the Marketing Agreement was
canceled.
Additionally,
on January 15, 2008 and February 1, 2008 we entered into an Investor
Relations/Public Relations Agreement (collectively, the “Agreements”) with
FiveMore Fund, Ltd. and Mainland Participation Corp., respectively
(individually, the “Consultant” and collectively, the
“Consultants”). Pursuant to the Agreements, Consultants were
scheduled to (a) advise us with respect to our plans and strategies for raising
capital; (b) aid us in developing a marketing plan directed at informing the
investing public as to the business of Client; (c) assist us in its discussions
with underwriters, investors, brokers and institutions and other professionals
retained by us; (d) inform us about US and international banks offering stock
based credit line facilities; (e) assist us with identifying possible
acquisitions or merger candidates; (f) advise and assist us with public
relations and promotion matters; (g) assist us with a potential listing at
Frankfurt Stock Exchange; and (h) introduce members of us to US and European
securities dealers and market makers, if we so desire. At no time
will either Consultant provide services which would require the Consultant to be
registered and licensed with any federal or state regulatory body or
self-regulating agency.
On
March 4, 2008
we canceled the
Agreements.
Our
independent auditor has expressed substantial doubt about our ability to
continue as a going concern. The notes to our financial statements include an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern. Among the reasons cited in the notes as raising substantial
doubt as to our ability to continue as a going concern are the following: we are
a development stage company with no operations, a stockholders’ deficiency of
$2,007,324 and cash used in operations from inception through December 31, 2007
of $1,849,869. As of December 31, 2007, we had a working capital
deficiency of $710,102.
Our
ability to continue as a going concern is dependent on our ability to further
implement our business plan, raise additional capital and generate revenues.
These conditions raise substantial doubt about our ability to continue as a
going concern.
Plan of
Operations
Management
has forged relations with several corporate finance entities that have expressed
an interest in participating in our overall expansion in the United States and
Europe.
The
efforts of our management team, our consultants and advisors will be to complete
appropriate financing arrangements. The completion of the $20,000,000 financing
will be our exclusive effort prior to the construction and development of the
first installation.
Upon
completion of the $20,000,000 capitalization, our next priority will be the
construction of the first installation. For this construction, it will be
necessary for management to initially focus on two specific activities. First,
project management consultants will be engaged to assist us in all matters
associated with identifying and preparing the site. This activity includes
regulatory approvals as well as final design and layout based upon commercial
equipment available for procurement and/or fabrication
In the
event we are not able to raise $20,000,000 to complete construction of our first
showcase facility, we will be forced to seek additional financing in order to
maintain operations over the next 12 months.
In
addition, we will continue to develop our industry contacts, develop our
business plan, refine our technology, search for suitable sites, and devote
efforts to secure the capital required to implement our business
plan.
Second,
our management and consulting engineers will commence activities to enlarge our
management team by adding key employees as well as consultants that will be
responsible for specific tasks & operations associated with the first
installation.
During
the permitting period, estimated by management and their consulting engineers,
to be 90 to 120 days, our engineering and fabrication team will finalize design
and layouts for the first site as well as prepare and circulate site building
bid documents. Similarly, turnkey contracts will be negotiated for specific
pieces of the thermal processing equipment utilized in the rubber to oil
conversion process.
The
supply and operation of the electrical generation equipment will also be
contracted out during this period of the development. We have already identified
and pre-qualified several suppliers of the type of electrical generation
equipment. However, as a result of the preliminary stage of these discussions,
we are unable to provide greater detail as to the exact nature of the
relationship or participation of these suppliers.
Also at
this time, some preliminary site work will be completed to facilitate the
installation of the design/build structures required. The site will also be
prepared to accept the modularized electrical generation equipment that will be
installed on the site subsequent to the installation and start-up of the thermal
conversion process. The contracted operator of the electrical generation
equipment will also be responsible for the sale of electricity. During initial
discussions with these supplier/operators, an interest has been expressed in
participating in our overall business. Some discussions pertaining to the
exchange of our shares for all, or part, of the value of the turnkey have
transpired. However, it is unlikely that meaningful discussions will commence
until such time as our capitalization set forth above has been completed. Even
if the capitalization has been completed, there can be no certainty that the
contract operators will participate in the first installation other than on a
fee for services basis. In any event, until such time as the $20 Million
capitalization has been completed, specific details pertaining to the
participation of supplier/operators will not be available and we are unable to
provide the details of any possible forthcoming agreements.
Management
and their consulting engineers believe that, the overall fabrication and
installation timeframe is approximately 18 months from execution of contracts.
As all the components utilized in our installation are currently in use in
manufacturing operations in the United States and around the world, lead times
for delivery and installation are generally short.
Several
components are stock items and available for almost immediate delivery. However,
the engineering firm responsible for the overall project management of the first
installation will monitor all fabricator/suppliers to ensure that the various
components and required ancillary equipment and structures have been readied
onsite for installation. Additionally, engineering verification will be required
for all progress draws prior to our making payments to the various
supplier/fabricators. As is customary with the supply of this type of equipment,
established payment holdbacks upon completion of installation and start-up will
be released only upon engineering verification of performance. Additionally, it
may be necessary for selected fabricator/suppliers to provide delivery and
performance bonds specific to their components.
The
entire project could be delayed as a direct result of several factors. Should we
not be able to a lease or purchase a suitable property within a timely manner,
the project could be delayed indefinitely until such time as an appropriate site
is secured. Although we have located several suitable sites that could be
appropriately permitted, unforeseen regulatory changes could make it difficult
to obtain the required permits causing further delays thereby causing us to take
additional time to identify other suitable sites. Should there be delays in the
delivery of thermal processing or electrical generation equipment as a result of
material shortages, labor problems, transportation difficulties etc., our
commercial operation would be delayed thereby not allowing us to generate
revenues as anticipated. Should the delay be lengthy, management could be
required to seek additional financing or seek other remedies in law pertaining
to delivery and performance failures of the fabricator suppliers. Regulatory
changes causing delays in the construction, processing equipment installation
and start-up of the showcase facility will lengthen the period of time for us to
start to generate revenues from operations. We will only be in the position to
commence a US expansion of processing facilities upon the successful completion,
start-up and operation of the showcase facility.
The
supplier/fabricators will also be responsible for the training of key employees
and/or contractors and will work with the engineering project managers to
include established operating protocols in the systems operations manual. In
conjunction with this effort, during the start-up of the first installation,
fabricator/suppliers and the project management will establish operating set
points incorporating them into the system software thereby ensuring continued
reliable system performance and measurable quality standards.
It is
management’s and their consulting engineers opinion that overall, the entire
installation through construction completion, training, start-up and commercial
acceptance based upon engineering performance verification is approximately 18
months. The overall development schedule could be delayed as a result of
unforeseen regulatory delays, labor disputes and seasonal delays due to weather
conditions.
Pursuant
to preliminary discussions with corporate finance professionals, items #16
through #18 set forth below are anticipated fees and expenses pertaining to the
$20,000,000 financing that we will be seeking. The following schedule outlines
the categories associated with the financing, completion, start-up and
commercial operation of the first installation. It is expected that many of the
following development categories outlined in the following schedule will be
completed concurrently.
|
1)
Consulting Fees & Out-of -Pocket Reimbursement
|
|
$
|
480,000
|
|
|
2)
Site Lease Matters & Development Fees
|
|
$
|
260,000
|
|
|
3)
Site Engineering, Regulatory & Compliance
|
|
$
|
211,500
|
|
|
4)
Site Work
|
|
$
|
1,125,600
|
|
|
5)
Buildings
|
|
$
|
798,500
|
|
|
6)
Rubber to Oil Thermal Conversion Process Equipment
|
|
$
|
7,736,500
|
|
|
7)
Warehouse & Conveyance Equipment Leases/Purchases
|
|
$
|
74,083
|
|
|
8)
Government Relations
|
|
$
|
41,000
|
|
|
9)
Administrative Construction Expenses
|
|
$
|
153,000
|
|
|
10)Legal,
Accounting, Travel & Misc. Fees & Expenses
|
|
$
|
322,000
|
|
|
11)Media,
Promotion & Government Relations
|
|
$
|
313,000
|
|
|
13)Salaries,
Wages & Fees
|
|
$
|
846,434
|
|
|
14)Consulting
Engineers
|
|
$
|
33,000
|
|
|
15)Turn-key
Energy System & Installation
|
|
$
|
5,000,000
|
|
|
16)Financing
Fees
|
|
$
|
2,000,000
|
|
|
17)Financing
Legal & Accounting
|
|
$
|
300,000
|
|
|
18)Administrative
Contingency
|
|
$
|
305,383
|
|
|
Total
|
|
$
|
20,000,000
|
|
During
the construction and installation of the first facility, our future Vice
President of Marketing with assistance from our future Vice President of
Technology will commence a specific and targeted marketing campaign directed at
the current rubber waste disposal infrastructure, regulatory agencies, retail
associations and the public. Promotional activities will include media, public
awareness, trade journals, seminars and meetings and discussions with waste
hauler and disposal companies. These activities will also include meetings and
discussions with state regulatory and enforcement officials.
Based
upon discussions with state regulators, it is our belief that all communities in
the United States and Canada are being encouraged by state, provincial and
federal authorities to be more environmentally responsible. An example of
amplified environmental concern occurring in 2004 was the State of Michigan’s
position pertaining to the continued dumping of waste from out-of-state
communities that included Toronto, Ontario, Canada. State regulations were
implemented in an attempt to curtail the amount and sources of waste being
disposed at Michigan dump sites. It is our belief, that since the early 1990s
the federal EPA has been concerned with the interstate transportation of waste.
The federal position seems to be that communities that generate should be
responsible for the ultimate disposition of the waste within their municipality.
An attempt to limit interstate transportation of waste was contained in the
Interstate Modal Transportation Act which was never approved as originally
proposed.
Community
based environmental initiatives are being encouraged. Dealing with waste at the
source is considered much more environmentally friendly than trucking the waste
hundreds of miles away. The first installation is perceived as a convenient and
environmentally friendly solution to rubber waste. The targeted marketing
campaign will exploit the current thinking pertaining to community based waste
reduction and processing and waste to energy initiatives.
However,
there may be difficulties associated with encouraging the existing disposal and
transportation infrastructure to utilize the Alliance installation as an
alternative to their current method of disposal. Historic relationships between
the existing infrastructure serving retailers and dumps or processors often
hundreds of miles away and the financial commitment to the trucking the waste
may be difficult to overcome. However, management’s discussion with several
haulers has been encouraging as a cost effective alternative to the existing
transportation of waste to often out-of-state locations is a welcomed
alternative.
A
targeted marketing campaign pertaining to the sale of carbon black and scrap
steel will also commence prior to completion of construction. However, we may
not be positioned to enter into carbon black supply contracts until such time as
samples are made available from the operation of the showcase facility. It is
likely that these samples would be made available as a result of operation the
processing equipment during the performance testing phase of the installation
and immediately prior to commercial certification. The commercial certification
will occur after the equipment has operated for a period of approximately 90
days and all contract performance specifications have been achieved.
There may
be delays associated with the correction of deficiencies in order that the
processing equipment meet certain performance standards prior to commercial
certification. However, the Company has included the 90 day start-up phase
within the overall timeline to allow for the correction of deficiencies by
fabricator suppliers. Although the vast majority of the rubber to oil system is
based upon off-the-shelf components, if further delays occur as a result of
fabricator suppliers correction of deficiencies, we could be delayed in our
ability to generate revenue.
Although,
we have identified several experts currently responsible for the sale of carbon
products currently with other companies and they have expressed an interest in
the position of VP Marketing, there is no guarantee that their previous
experience will allow them to successfully initiate a campaign that will lead to
the sale of our carbon black. However, the successful operation of the thermal
system will generate commercial grades of carbon black that could be utilized by
rubber formulation companies for specific products. Additionally, our carbon
black could be blended with other sources of carbon black thereby allowing
rubber formulators to meet customers requirements for recycled content. We
believe our carbon black will be advantageous to other forms of recycled content
as it will be is a virgin product made from oil that is a waste rubber
derivative.
Furthermore,
the heat recovery system utilized throughout the entire electrical generation
system will be available to deliver steam for additional industrial uses. Heat
recovery boilers utilized in the system can make steam available for use in a
steam turbine to make additional electricity for sale by ARC. The recovered heat
could also be utilized in several industrial applications.
The ARC
installation is designed to operate continuously. As a result, the installation
has the ability to produce heat constantly to service the steam requirements of
a turbine generating electricity or other commercial uses. The heat produced can
be considered a bi-product from the operation of the thermal conversion and
electrical generation equipment. Rather than utilizing the heat source for any
particular use, we could also use a commercial cooling tower to cool the thermal
processing equipment and could decide not to operate the heat recovery system
components associated with the reciprocating engines responsible for the
generation of electricity. However, management believes that utilizing the
bi-product heat capacity in an environmentally friendly way to generate
additional electricity is a common sense alternative to exhausting heat into the
atmosphere.
If the
Company was to move forward with a hydroponics initiative as an alternative to a
steam turbine or industrial uses, the type of relationship previously discussed
is based upon the notion that the hydroponics greenhouse operator would lease a
site immediately adjacent to the showcase facility. Based upon our final
equipment selection, pertaining to both the thermal conversion of rubber to oil
and the generation of electricity, we will be positioned to provide details as
to the amount of steam and/or hot water that be generated for conveyance to the
greenhouse via an insulated pipeline. A heat exchanger could transfer the heat
from the ARC steam and/or hot water to the hot water in the hydroponics
operator’s underground reservoir.
Regardless
of the ultimate use of the recovered steam, the ARC cooled condensate and/or
water will be returned to the ARC heat recovery boilers heated again for reuse
in a closed loop system.
Should
ARC utilize the steam in a turbine, further electrical energy will be available
to sell into the grid. However, if the recovered steam and/or heat is
utilized in industrial or other applications a discounted avoided cost, defined
as the operators cost of natural gas or fuel oil less a negotiated discount,
will be used to determine the recovered heat's selling price. We will not be
positioned to make a final decision in connection to the use of the recovered
heat until a development site has been agreed upon and the $20,000,000 financing
has been completed.
Going Concern
Consideration
As
reflected in the accompanying December 31, 2007 financial statements we are in
the development stage with no operations, a stockholders’ deficiency of
$2,007,324, a working capital deficiency of $710,102 and used cash in operations
from inception of $1,849,869. This raises substantial doubt about our ability to
continue as a going concern. Our ability to continue as a going concern is
dependent on our ability to raise additional capital and implement our business
plan. The financial statements do not include any adjustments that might be
necessary if we are unable to continue as a going concern.
We
believe that actions presently being taken to obtain additional funding and
implement our strategic plans provide the opportunity for us to continue as a
going concern.
Liquidity and Capital
Resources
Our
balance sheet as of December 31, 2007 reflects assets of $30,053 consisting of
cash of $27,541 and property and equipment of $2,512, compared to assets of
$36,782 as of December 31, 2006. As of December 31, 2007, we had
current liabilities of $737,643 consisting of accounts payable and accrued
interest of $85,150, an amount of $427,493 due to a related party, a note
payable of $25,000 with a net discount of $0, and a note payable due to a
related party of $200,000. In comparison to December 31, 2006, we had
current liabilities of $594,954 which consisted of accounts payable and accrued
interest of $58,722, an amount of $361,851 due to a related party, a note
payable of $23,841 with a net discount of $1,159 and a note payable due to a
related party of $150,000.
Cash and
cash equivalents from inception to date have been sufficient to cover expenses
involved in starting our business. We will require additional funds to continue
to implement and expand our business plan during the next twelve
months.
Critical Accounting
Policies
Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use if estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
Our
significant accounting policies are summarized in Note 1 of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
Off Balance Sheet
Arrangements
We have
no off-balance sheet arrangements.
Recent Accounting
Pronouncements
In
September 2006, the FASB
issued SFAS No. 157, “
Fair
Value Measurements
”. The objective of SFAS 157 is to increase consistency
and comparability in fair value measurements and to expand disclosures about
fair value measurements. SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS 157 applies under
other accounting pronouncements that require or permit fair value measurements
and does not require any new fair value measurements. The provisions of SFAS No.
157 are effective for fair value measurements made in fiscal years beginning
after November 15, 2007. The adoption of this statement is not expected to have
a material effect on the Company's future reported financial position or results
of operations.
In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “
The
Fair Value Option for Financial Assets and Financial Liabilities – Including an
Amendment of FASB Statement No. 115
”. This statement permits
entities to choose to measure many financial instruments and certain other items
at fair value. Most of the provisions of SFAS No. 159 apply only to entities
that elect the fair value option. However, the amendment to SFAS No. 115 “
Accounting
for Certain Investments in Debt and Equity Securities
” applies to all
entities with available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, “
Fair
Value Measurements”.
The adoption of this statement is not expected to
have a material effect on the Company's financial statements.
In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “
Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51
”. This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
Item 7.
Financial Statements
and Supplementary Data
The
financial statements of the Company, together with the report of the auditors,
are as follows:
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONTENTS
|
F-1
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
|
|
F-2
|
BALANCE
SHEETS AS OF DECEMBER 31, 2007 AND 2006
|
|
|
|
|
F-3
|
STATEMENTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 2007 AND 2006 AND FOR THE
PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO DECEMBER 31,
2007
|
|
|
|
|
F-4
|
STATEMENT
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY FOR THE PERIOD FROM NOVEMBER 6,
2001 (INCEPTION) TO DECEMBER 31, 2007
|
|
|
|
|
F-5
|
STATEMENTS
OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 AND FOR THE
PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO DECEMBER 31,
2007
|
|
|
|
|
F-6
- F-16
|
NOTES
TO AUDITED FINANCIAL STATEMENTS
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors of:
Alliance
Recovery Corporation
We have
audited the accompanying balance sheet of Alliance Recovery Corporation as of
December 31, 2007 and 2006, and the related statements of operations, changes in
stockholders’ deficiency and cash flows for the years ended December 31, 2007
and 2006 and for the period November 1, 2001 (Inception) to December 31,
2007. 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 audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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 Alliance Recovery Corporation as of
December 31, 2007 and 2006 the results of its operations and its cash flows for
the two years then ended and for the period November 1, 2001 (Inception) to
December 31, 2007 in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company had a working capital deficiency of $710,102,
a stockholders’ deficiency of $2,007,324 and used cash in operations from
inception of $1,849,869. This raises substantial doubt about its
ability to continue as a going concern. Management’s plans concerning
this matter are also described in Note 11. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
WEBB
& COMPANY, P.A.
Certified
Public Accountants
Boynton
Beach, Florida
April 9,
2008
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
27,541
|
|
|
$
|
32,037
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
2,512
|
|
|
|
4,745
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
30,053
|
|
|
$
|
36,782
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
54,316
|
|
|
$
|
53,543
|
|
|
Accrued
interest
|
|
|
30,834
|
|
|
|
5,719
|
|
|
Due
to related party
|
|
|
427,493
|
|
|
|
361,851
|
|
|
Notes
payable - net of discount of $0 and $1,159 respectively
|
|
|
25,000
|
|
|
|
23,841
|
|
|
Notes
payable - related party
|
|
|
200,000
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
737,643
|
|
|
|
594,954
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable - related party, net of discount of $19,622 and $0,
respectively
|
|
|
120,378
|
|
|
|
-
|
|
|
Note
payable - convertible , net of discount of $5,468 and $0,
respectively
|
|
|
94,533
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LONG TERM LIABILITIES
|
|
|
214,911
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
952,554
|
|
|
|
594,954
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Subject to Rescission Offer, $.01 par value,
|
|
|
|
|
|
|
|
|
|
1,986,646
shares issued and outstanding
|
|
|
1,084,823
|
|
|
|
1,084,823
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.01 par value, 100,000,000 shares authorized, 18,103,779 and
16,947,179 shares issued and outstanding, respectively
|
|
|
181,038
|
|
|
|
169,472
|
|
|
Additional
paid in capital
|
|
|
929,517
|
|
|
|
593,347
|
|
|
Subscriptions
receivable
|
|
|
(6,600
|
)
|
|
|
(6,300
|
)
|
|
Deferred
compensation
|
|
|
(53,902
|
)
|
|
|
-
|
|
|
Accumulated
deficit during development stage
|
|
|
(3,057,377
|
)
|
|
|
(2,399,514
|
)
|
|
Total
Stockholders’ Deficiency
|
|
|
(2,007,324
|
)
|
|
|
(1,642,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIENCY
|
|
$
|
30,053
|
|
|
$
|
36,782
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to audited financial statements.
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
For
The Period From November 6, 2001
|
|
|
|
|
For
the Year Ended December 31,
|
|
|
(Inception)
|
|
|
|
|
|
|
|
|
|
|
to December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
526,868
|
|
|
Consulting
fees - related party
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
1,520,833
|
|
|
Professional
fees
|
|
|
78,733
|
|
|
|
49,530
|
|
|
|
369,706
|
|
|
Investor
relations
|
|
|
261,154
|
|
|
|
-
|
|
|
|
261,154
|
|
|
General
and administrative
|
|
|
38,643
|
|
|
|
44,812
|
|
|
|
332,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
628,530
|
|
|
|
344,342
|
|
|
|
3,011,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
29,333
|
|
|
|
15,674
|
|
|
|
46,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE PROVISION FOR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
(657,863
|
)
|
|
|
(360,016
|
)
|
|
|
(3,057,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(657,863
|
)
|
|
$
|
(360,016
|
)
|
|
$
|
(3,057,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding during the period - basic and
diluted
|
|
|
17,252,116
|
|
|
|
16,835,972
|
|
|
|
|
|
See
accompanying notes to audited financial statements.
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
FOR
THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION)
TO
DECEMBER 31, 2007
|
|
|
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Subscription
|
|
|
Deferred
Stock
|
|
|
Accumulated
Deficit During Development
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued to founders for services ($0.01 per share)
|
|
|
8,410,000
|
|
|
$
|
84,100
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
84,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash ($0.0137 per share)
|
|
|
7,687,800
|
|
|
|
76,878
|
|
|
|
28,186
|
|
|
|
(105,064
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period from November 6, 2001 (inception) to December 31,
2001
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(104,933
|
)
|
|
|
(104,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2001 (Restated)
|
|
|
16,097,800
|
|
|
|
160,978
|
|
|
|
28,186
|
|
|
|
(105,064
|
)
|
|
|
-
|
|
|
|
(104,933
|
)
|
|
|
(20,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock with warrants issued for services ($0.50 per
share)
|
|
|
112,710
|
|
|
|
1,127
|
|
|
|
55,228
|
|
|
|
-
|
|
|
|
(27,083
|
)
|
|
|
-
|
|
|
|
29,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services ($0.50 per share)
|
|
|
100,000
|
|
|
|
1,000
|
|
|
|
49,000
|
|
|
|
-
|
|
|
|
(16,667
|
)
|
|
|
-
|
|
|
|
33,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collection
of subscriptions receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,290
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, 2002
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(482,211
|
)
|
|
|
(482,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002 (Restated)
|
|
|
16,310,510
|
|
|
|
163,105
|
|
|
|
132,414
|
|
|
|
(48,774
|
)
|
|
|
(43,750
|
)
|
|
|
(587,144
|
)
|
|
|
(384,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,750
|
|
|
|
-
|
|
|
|
43,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, 2003
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(417,622
|
)
|
|
|
(417,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2003
(Restated)
|
|
|
16,310,510
|
|
|
|
163,105
|
|
|
|
132,414
|
|
|
|
(48,774
|
)
|
|
|
-
|
|
|
|
(1,004,766
|
)
|
|
|
(758,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock with options issued for services ($0.50 per share)
|
|
|
200,000
|
|
|
|
2,000
|
|
|
|
98,000
|
|
|
|
-
|
|
|
|
(4,158
|
)
|
|
|
-
|
|
|
|
95,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, 2004
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(489,255
|
)
|
|
|
(489,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2004
(Restated)
|
|
|
16,510,510
|
|
|
|
165,105
|
|
|
|
230,414
|
|
|
|
(48,774
|
)
|
|
|
(4,158
|
)
|
|
|
(1,494,021
|
)
|
|
|
(1,151,434
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock with options issued for services ($0.50 per share)
|
|
|
300,000
|
|
|
|
3,000
|
|
|
|
147,000
|
|
|
|
(300
|
)
|
|
|
(149,700
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147,621
|
|
|
|
-
|
|
|
|
147,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collection
of subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,774
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, 2005
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(545,477
|
)
|
|
|
(545,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2005
|
|
|
16,810,510
|
|
|
$
|
168,105
|
|
|
$
|
377,414
|
|
|
$
|
(6,300
|
)
|
|
$
|
(6,237
|
)
|
|
$
|
(2,039,498
|
)
|
|
|
(1,506,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,237
|
|
|
|
-
|
|
|
|
6,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of notes payable to common stock
|
|
|
136,669
|
|
|
|
1,367
|
|
|
|
215,933
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
217,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss, 2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(360,016
|
)
|
|
|
(360,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2006
|
|
|
16,947,179
|
|
|
$
|
169,472
|
|
|
$
|
593,347
|
|
|
$
|
(6,300
|
)
|
|
$
|
-
|
|
|
$
|
(2,399,514
|
)
|
|
$
|
(1,642,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services ($0.51 per share)
|
|
|
300,000
|
|
|
|
3,000
|
|
|
|
150,000
|
|
|
|
(300
|
)
|
|
|
(152,700
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services ($.30 per share)
|
|
|
278,000
|
|
|
|
2,780
|
|
|
|
80,620
|
|
|
|
-
|
|
|
|
(83,400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for consulting services ($.15 per share)
|
|
|
240,000
|
|
|
|
2,400
|
|
|
|
33,600
|
|
|
|
-
|
|
|
|
(36,000
|
)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
338,600
|
|
|
|
3,386
|
|
|
|
43,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
218,198
|
|
|
|
-
|
|
|
|
218,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
28,148
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss, December 31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(657,863
|
)
|
|
|
(657,863
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2007
|
|
|
18,103,779
|
|
|
$
|
181,038
|
|
|
$
|
929,517
|
|
|
$
|
(6,600
|
)
|
|
$
|
(53,902
|
)
|
|
$
|
(3,057,377
|
)
|
|
$
|
(2,007,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to audited financial statements.
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
For
The Period From
|
|
|
|
|
|
|
|
November
6, 2001 (Inception)
|
|
|
|
|
For
the Year Ended December 31,
|
|
|
To December
|
|
|
|
|
2007
|
|
|
2006
|
|
|
31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(657,863
|
)
|
|
$
|
(360,016
|
)
|
|
$
|
(3,057,377
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for services
|
|
|
218,198
|
|
|
|
6,237
|
|
|
|
658,353
|
|
|
Depreciation
expense
|
|
|
2,233
|
|
|
|
2,233
|
|
|
|
8,654
|
|
|
Amortization
|
|
|
4,217
|
|
|
|
5,455
|
|
|
|
17,058
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
to related party
|
|
|
65,642
|
|
|
|
53,692
|
|
|
|
427,493
|
|
|
Accounts
payable and accrued expenses
|
|
|
25,888
|
|
|
|
30,700
|
|
|
|
95,950
|
|
|
Net
Cash Used In Operating Activities
|
|
|
(341,685
|
)
|
|
|
(261,699
|
)
|
|
|
(1,849,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,166
|
)
|
|
Net
Cash Used In Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of debt
|
|
|
50,000
|
|
|
|
25,000
|
|
|
|
263,500
|
|
|
Proceeds
from issuance of debt - related party
|
|
|
140,000
|
|
|
|
250,000
|
|
|
|
294,000
|
|
|
Proceeds
from issuance of convertible debt
|
|
|
100,001
|
|
|
|
-
|
|
|
|
100,001
|
|
|
Proceeds
from issuance of common stock subject to rescission
|
|
|
|
|
|
|
|
|
|
|
1,084,823
|
|
|
Proceeds
from issuance of common stock
|
|
|
47,188
|
|
|
|
-
|
|
|
|
146,252
|
|
|
Net
Cash Provided By Financing Activities
|
|
|
337,189
|
|
|
|
275,000
|
|
|
|
1,888,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
(4,496
|
)
|
|
|
13,301
|
|
|
|
27,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
32,037
|
|
|
|
18,736
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
27,541
|
|
|
$
|
32,037
|
|
|
$
|
27,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non cash investing & financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Cash
paid for interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to audited financial statements
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO AUDITED FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2007 and 2006
NOTE
1
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A)
Organization
Alliance
Recovery Corporation (a development stage company) (the “Company”) was
incorporated under the laws of the State of Delaware on November 6, 2001. The
Company is developing resource recovery technologies and strategies to convert
industrial and other waste materials into fuel oil, gases and other valuable
commodities.
Activities
during the development stage include developing the business plan and raising
capital.
(B)
Use
of Estimates
In
preparing financial statements in conformity with generally accepted accounting
principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from those
estimates.
(C)
Cash
and Cash Equivalents
For
purposes of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents. The Company at times has cash in excess of FDIC
insurance limits and places its temporary cash investments with high credit
quality financial institutions. At December 31, 2007, the Company did not have
any balances that exceeded FDIC insurance limits.
(D)
Property
and
Equipment
Property
and equipment are stated at cost, less accumulated depreciation. Expenditures
for maintenance and repairs are charged to expense as incurred. Depreciation is
provided using the straight-line method over the estimated useful life of five
years.
(E)
Income
Taxes
The
Company accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement 109”). Under
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. As of
December 31, 2007 the Company has a net operating loss carry forward of
$3,057,377, available to offset future taxable income through 2026. The
valuation allowance at December 31, 2007 was $1,039,508. The net change in the
valuation allowance for the year ended December 31, 2007 was an increase of
$223,673.
(F)
Stock-Based
Compensation
Effective
January 1, 2006 The Company adopted SFAS No. 123R “Share-Based Payment”
(“SFAS 123R”), a revision to SFAS No. 123 “Accounting for Stock-Based
Compensation” (“SFAS 123”). Prior to the adoption of SFAS 123R the Company
accounted for stock options in accordance with APB Opinion No. 25
“Accounting for Stock Issued to Employees” (the intrinsic value method), and
accordingly, recognized no compensation expense for stock option
grants.
Under the
modified prospective approach, the provisions of SFAS 123R apply to new awards
and to awards that were outstanding on January 1, 2006 that are subsequently
modified, repurchased or cancelled. Under the modified prospective approach,
compensation cost recognized in the year ended December 31, 2006 includes
compensation cost for all share-based payments granted prior to, but not yet
vested as of January 1, 2006, based on the grant -date fair value estimated in
accordance with the original provisions of SFAS 123, and the compensation costs
for all share-based payments granted subsequent to January 31, 2006, based on
the grant-date fair value estimated in accordance with the provisions of SFAS
123R. Prior periods were not restated to reflect the impact of adopting the new
standard.
(G)
Loss
Per Share
Basic and
diluted net loss per common share is computed based upon the weighted average
common shares outstanding as defined by Financial Accounting Standards No. 128,
“Earnings Per Share.” As of December 31, 2007 and 2006, 2,403,197 and 2,154,896;
respectively of common share equivalents were outstanding but
anti-dilutive and therefore not used in the calculation of diluted net loss per
share
(H)
Business
Segments
The
Company operates in one segment and therefore segment information is not
presented.
(I)
Long-Lived
Assets
The
Company accounts for long-lived assets under the Statements of Financial
Accounting Standards Nos. 142 and 144 “Accounting for Goodwill and Other
Intangible Assets” and “Accounting for Impairment or Disposal of Long-Lived
Assets” (“SFAS No. 142 and 144”). In accordance with SFAS No. 142 and 144,
long-lived assets, goodwill and certain identifiable intangible assets held and
used by the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
goodwill and intangible assets, the recoverability test is performed using
undiscounted net cash flows related to the long-lived assets.
(J)
Reclassification
of Prior Period
Accounts
Certain
amounts from prior periods have been reclassified to conform to the current year
presentation.
(
K)
Recent
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157, “
Fair
Value Measurements
”. The objective of SFAS 157 is to increase consistency
and comparability in fair value measurements and to expand disclosures about
fair value measurements. SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS 157 applies under
other accounting pronouncements that require or permit fair value measurements
and does not require any new fair value measurements. The provisions of SFAS No.
157 are effective for fair value measurements made in fiscal years beginning
after November 15, 2007. The adoption of this statement is not expected to have
a material effect on the Company's future reported financial position or results
of operations.
In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “
The
Fair Value Option for Financial Assets and Financial Liabilities – Including an
Amendment of FASB Statement No. 115
”. This statement permits
entities to choose to measure many financial instruments and certain other items
at fair value. Most of the provisions of SFAS No. 159 apply only to entities
that elect the fair value option. However, the amendment to SFAS No. 115 “
Accounting
for Certain Investments in Debt and Equity Securities
” applies to all
entities with available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, “
Fair
Value Measurements”.
The adoption of this statement is not expected to
have a material effect on the Company's financial statements.
In December 2007, the
Financial Accounting Standards Board (FASB) issued SFAS No. 160, “
Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51
”. This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements
.
(L)
Fair Value of Financial Instruments.
The
carrying amounts reported in the balance sheet for cash, receivables, accounts
payable, accrued expenses and notes payable approximate fair value based on the
short-term maturity of these instruments.
NOTE 2
PROPERTY
AND EQUIPMENT
Property
and equipment at December 31, 2007 and 2006 were as follows:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Computer
|
|
$
|
11,166
|
|
|
$
|
11,166
|
|
|
Depreciation
with less accumulated
|
|
|
(8,654
|
)
|
|
|
(6,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,512
|
|
|
$
|
4,745
|
|
During
the year ended December 31, 2007 and 2006 and for the period from November 6,
2001 to December 31, 2007, the Company recorded depreciation expense of $2,233
$2,233, and $8,654 respectively.
NOTE 3 NOTES
PAYABLE
|
|
|
December
31
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Note
Amount
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
Discount
|
|
|
-
|
|
|
|
(1,159
|
)
|
|
Net
|
|
$
|
25,000
|
|
|
$
|
23,841
|
|
In
December 2006, an investor loaned the Company a total of $25,000. The note is
unsecured, due one year from the date of issuance and is non-interest bearing
for the first nine months, then accrues interest at a rate of 6% per annum for
the remaining three months. The Company imputed interest on the non
interest-bearing portion of the notes at a rate of 6% per annum. During the
years ended December 31, 2007 and 2006 the Company recorded a discount on the
notes of $1,500 and amortized $341 and $1,159 of the discount respectively as
interest expense. As of December 31, 2007 the note was in default.
NOTE 4
NOTES
PAYABLE - RELATED PARTY
In June
2006, a Director of the Company loaned the Company $100,000. The loan bears a
rate of interest of 8% per annum and is payable twelve months from the date of
issuance. In addition the Company issued the director warrants to purchase
100,000 shares of common stock with an exercise price of $1.50 per share for one
year from the date of the note. The loan is unsecured and was due June 28, 2007.
The note was extended until June 28, 2008. In December 2006, the
Director loaned the Company an additional $50,000. The loan bears a rate of
interest of 8% per annum and is payable eighteen months from the date of
issuance. In January 2007 a director of the Company loaned the Company $50,000.
The loan bears interest at a rate of eight percent per annum. The loan is
unsecured and due July 31, 2008. As of December 31, 2007, the Company has an
outstanding balance under the three note agreements of $200,000 and recorded
accrued interest expense of $20,797 related to these three notes.
NOTE 5
CONVERTIBLE
NOTES PAYABLE - RELATED PARTY
|
Note
Amount
|
|
$
|
140,000
|
|
|
Discount
|
|
|
(19,622
|
)
|
|
Net
|
|
$
|
120,378
|
|
In May
2007, a Director of the Company loaned the Company $50,000. The loan bears a
rate of interest of 8% per annum and is payable twenty-four months from the date
of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. In addition
the Company issued the director warrants to purchase 25,000 shares of common
stock with an exercise price of $1.00 per share for two years from the date of
the note. The loan is unsecured and due May 17, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life
of two years. The value of the warrants on the date of issuance was $837. The
Company will amortize the value over the term of the note. In June 2007 the
Mother of the Director loaned the Company an additional $40,000. The loan bears
a rate of interest of 8% per annum and is payable twenty-four months from the
date of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. The loan is unsecured
and due July 3, 2009. The fair value of the warrants was estimated on the
grant date using the Black-Scholes option pricing model with the following
weighted average assumptions: expected dividend yield 0%, volatility 103%,
risk-free interest rate of 4.87%, and expected warrant life of two years. The
fair value of the warrants on the date of issuance was $669. The Company will
amortize the value over the term of the note. In November 2007, a Director of
the Company loaned the Company an additional $50,000. The loan bears a rate of
interest of 10% per annum and is payable twenty-four months from the date of
issuance. The holder of the note has the right to convert the note into common
stock of the Company at the market value on the date of conversion but not at a
price less than $.11 per share of common stock. In addition the
Company issued the director warrants to purchase 454,550 shares of common stock
with an exercise price of $.50 per share for two years from the date of the
note. The loan is unsecured and due November 25, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 134%, risk-free interest rate of 2.92%, and expected warrant life
of two years. The value of the warrants on the date of issuance was $19,351. The
Company will amortize the value over the term of the note. As
December 31, 2007 the Company recorded accrued interest expense of $4,614 and
amortization expense of $1,235 related to these three notes.
NOTE 6
CONVERTIBLE
NOTES PAYABLE
|
Note
Amount
|
|
$
|
100,001
|
|
|
Discount
|
|
|
(5,468
|
)
|
|
Net
|
|
$
|
94,533
|
|
In July
2007, a third party loaned Company loaned the Company $100,001. The loan bears a
rate of interest of 8% per annum and is payable twenty-four months from the date
of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. In addition
the Company issued the director warrants to purchase 100,001 shares of common
stock with an exercise price of $1.00 per share for two years from the date of
the note. The loan is unsecured and due July 5, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 111%, risk-free interest rate of 4.99%, and expected warrant life
of two years. The fair value of the warrants on the date of issuance was $7,291.
The Company will amortize the value over the term of the note. As of
December 31, 2007 the Company recorded and accrued interest expense of $3,923
and amortization expense of $1,823 related to the note.
NOTE 7
EQUITY
SUBJECT TO RESCISSION
Common
stock sold prior to July, 2005 pursuant to the Company's private placement offer
may be in violation of the requirements of the Securities Act of 1933. In
October 2005, the Company became aware that the private placement offers made
prior to July 1, 2005 may have violated federal securities laws based on the
inadequacy of the Company's disclosures made in its offering documents for the
units concerning the lack of unauthorized shares. Based on potential violations
that may have occurred under the Securities Act of 1933, the Company made a
rescission offer to investors who acquired the Company's common stock prior to
July 1, 2005. As such, the proceeds of $1,084,823 from the issuance of 1,986,646
shares of common stock through July 1, 2005 have been classified outside of
equity in the balance sheet and classified as common stock subject to
rescission.
During
2002, the Company received cash and subscriptions receivable of $148,000 for
296,000 units consisting of one share of common stock and one common stock
warrant exercisable for a period of one year after an effective Registration
Statement is approved at an exercise price of $1.00 ($0.50 per share). Such
amounts have been recorded as equity subject to rescission as of December 31,
2007.
During
2003, the Company received cash and a subscription receivable of $661,323 for
1,322,646 units consisting of one share of common stock with one common stock
warrant exercisable for a period of one year after an effective Registration
Statement is approved at an exercise price of $1.00 ($0.50 per share). Such
amounts have been recorded as equity subject to rescission as of December 31,
2007.
During
the year ended December 31, 2004, the Company received cash of $92,500 for
185,000 units consisting of one share of common stock with one common stock
warrant exercisable for a period of one year after an effective Registration
Statement is approved at an exercise price of $1.00 per share ($0.50 per share).
Such amounts have been recorded as equity subject to rescission as of December
31, 2007.
In 2005,
the Company sold a total of 183,000 shares of common stock to nine individuals
for cash of $183,000 ($1.00per share). Such amounts have been recorded as equity
subject to rescission as of December 31, 2007.
NOTE 8
STOCKHOLDERS'
EQUITY
(A) Common
Stock Issued to Founders
During
2001, the Company issued 8,410,000 shares of common stock to founders for
services with a fair value of $84,100 ($0.01 per share).
(B) Common
Stock and Warrants Issued for Cash
During
2001, the Company received subscriptions receivable of $105,064 for 7,687,800
shares of common stock ($0.0137 per share).
During
the year ended December 31, 2004, the Company collected $159,782 of
subscriptions receivable.
In 2005,
the Company sold a total of 183,000 shares of common stock to nine individuals
for cash of $183,000 ($1.00 per share).
By the
year ended December 31, 2005 the Company collected $42,774 of subscription
receivables.
(C) Common
Stock and Warrants Issued for Services
During
April 2002, the Company entered into an agreement with a consultant to provide
services for a period of one year. The agreement called for compensation of
100,000 units with a fair value of $50,000 based on recent cash offerings ($0.50
per share). The Company recorded $16,667 and $33,333 of consulting expense for
the years ended December 31, 2003 and 2002, respectively. As of December 31,
2006, the warrants have expired.
During
May 2002, the Company entered into an agreement with a consultant to provide
services for a period of two months. The agreement called for compensation of
12,710 units, each unit consists of one share of common stock and one common
stock warrant exercisable at $1.00 per share for a period of two years. The
units had a fair value of $6,355 based on recent cash offerings. The Company
recorded consulting expense of $6,355 for the year ended December 31, 2002
($0.50 per share). As of December 31, 2006, the warrants have
expired.
During
July 2002, the Company entered into an agreement with a consultant to provide
services for a period of one year. The agreement called for compensation of
100,000 units, each unit consists of one share of common stock and one common
stock warrant exercisable at $1.00 per share for a period of two years. The
units had a fair value of $50,000 based on recent cash offerings ($0.50 per
share). The Company recorded $22,917 and $27,083 of consulting expense for the
years ended December 31, 2002 and 2003, respectively.
During
January 2004, the Company entered into a consulting agreement with a consultant
to provide management and public relations services. The agreement calls for the
consultant to provide services for a period of one year and the consultant to
receive: 200,000 shares of common stock warrants to purchase 100,000 shares of
common stock at an exercise price of $5.00 for a period of three years, and an
option to purchase 100,000 shares of common stock at an exercise price of $7.50
for a period of three years. The common stock has a fair value of $100,000 based
on recent cash offerings and will be amortized over the life of the agreement
($0.50 per share). For the years ended December 31, 2005 and 2004, the Company
has recognized consulting expense of $4,158 and $95,842, respectively under the
agreement. As of June 30, 2007, the warrants have expired.
In
January 2005, the Company entered into a consulting agreement with a consultant
to provide management and public relations services. The agreement calls for the
consultant to provide services for a period of one year and the consultant to
receive compensation of $2,000 per month. In addition the Company sold the
consultant 300,000 shares of common stock for cash proceeds of $300 and recorded
the fair value of the common stock of $149,700. The fair value of the common
stock will be recognized over the term of the agreement. For the year ended
December 31, 2005 the Company has recognized consulting expense of $143,463
under the agreement. For the year ended December 31, 2006 the Company recognized
consulting expense of $6,237 under the agreement.
In March
2007, the Company entered into a consulting agreement with a consultant to
provide management and public relations services. The agreement calls for the
consultant to provide services for a period of one year and the consultant to
receive compensation of $4,000 per month. In addition the Company sold the
consultant 300,000 shares of common stock for cash proceeds of $300 and recorded
the fair value of the common stock of $153,000. The fair value of the common
stock will be recognized over the term of the agreement. The Company has also
agreed to pay the public relation firm a 5% finder fee for any business or
capital raise derived from its relationship with the public relations firm. The
fair value of the common stock will be recognized over the term of the
agreement. For the year ended December 31, 2007 the Company recorded an expense
of $125,198 under this agreement and deferred compensation of
$27,502.
In July
2007, the Company entered into a consulting agreement with a consultant to
provide public relations services. The agreement calls for the consultant to
provide services for a period of one month and the consultant to receive
compensation of 278,000 shares of common stock with the fair value of the common
stock of $83,400 ($.30 per share). The fair value of the common stock will be
amortized over the term of the agreement. For the year ended December 31, 2007
the Company recorded an expense of $83,400 under this
agreement.
In
November 2007, the Company entered into a consulting agreement with a consultant
to provide public relations services. The agreement calls for the consultant to
provide services for a period of six months and the consultant to
receive compensation of 240,000 shares of common stock with the fair value of
the common stock of $36,000 ($.15 per share). The fair value of the common stock
will be amortized over the term of the agreement. For the year ended December
31, 2007 the Company recorded an expense of $9,600 under this agreement and
deferred compensation of $26,400.
In
December 2007, the Company entered into a consulting agreement with a consultant
to provide public relations services. The agreement calls for the consultant to
provide services for a period of six months and the consultant to receive
compensation of 500,000 shares of common stock with the fair value of the common
stock of $50,000 ($.10 per share) per month. . In March 2008 the Company entered
into a settlement agreement whereby the consultant acknowledged that no services
had been performed on behalf of the Company and that all stock issued to them
was returned and cancelled by Company.
(D)
Common Stock and Warrants Issued for Conversion of Notes
Payable
Between
October and December 2005 three investors and a director loaned the Company a
total of $205,000. The notes are unsecured, due one year from the date of
issuance and are non interest bearing for the first nine months, then accrued
interest at a rate of 6% per annum for the remaining three months. The
Company imputed interest of $12,300 on the non interest-bearing portion of the
notes at a rate of 6% per annum. On July 21, 2006, the
Company amended four promissory notes (the “Amended Notes”)
originally executed on October 7, 2005 in favor of Lewis Martin, James E.
Schiebel, Susan Hutchison, and Walter Martin respectively (each a “Holder” and
collectively the “Holders”). The Amended Notes provide for a conversion feature
pursuant to which each Holder is entitled to convert the outstanding principal
amount into shares of the Company's common stock at a conversion rate of $1.50
per share. In addition, upon conversion, each Holder is entitled to receive a
warrant to purchase one-quarter of one share of our common stock exercisable
within one-year of issuance at an exercise price of $1.50 per share. On July 24,
2006, pursuant to the terms of the Amended Notes, the Holders converted the
principal amount outstanding into shares of our common stock. Based on same, we
issued an aggregate of 136,669 shares of our common stock at a price of $1.50
per share (the “Conversion Shares”). In addition, we issued warrants with a
cashless exercise provision to purchase an aggregate of 51,250 shares of our
common stock to the Holders exercisable within one year of issuance at a price
per share of $1.50 (the “Conversion Warrants”). The Conversion Shares and shares
underlying the Conversion Warrants are restricted in accord with Rule 144
promulgated under the Securities Act of 1933, as amended.
In May
2007, a Director of the Company loaned the Company $50,000. The loan bears a
rate of interest of 8% per annum and is payable twenty-four months from the date
of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. In addition
the Company issued the director warrants to purchase 25,000 shares of common
stock with an exercise price of $1.00 per share for two years from the date of
the note. The loan is unsecured and due May 17, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life
of two years. The value of the warrants on the date of issuance was $837. The
Company will amortize the value over the term of the note. In June 2007 the
Mother of the Director loaned the Company an additional $40,000. The loan bears
a rate of interest of 8% per annum and is payable twenty-four months from the
date of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock.
The loan
is unsecured and due July 3, 2009. The fair value of the warrants was
estimated on the grant date using the Black-Scholes option pricing model with
the following weighted average assumptions: expected dividend yield 0%,
volatility 103%, risk-free interest rate of 4.87%, and expected warrant life of
two years. The fair value of the warrants on the date of issuance was $669. The
Company will amortize the value over the term of the note. In November 2007, a
Director of the Company loaned the Company an additional $50,000. The loan bears
a rate of interest of 10% per annum and is payable twenty-four months from the
date of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.11 per share of common stock. In addition
the Company issued the director warrants to purchase 454,550 shares of common
stock with an exercise price of $.50 per share for two years from the date of
the note. The loan is unsecured and due November 25, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 134%, risk-free interest rate of 2.92%, and expected warrant life
of two years. The value of the warrants on the date of issuance was $19,351. The
Company will amortize the value over the term of the note. As
December 31, 2007 the Company recorded accrued interest expense of $4,614 and
amortization expense of $1,235 related to these three notes.
In July
2007, a third party loaned Company loaned the Company $100,001. The loan bears a
rate of interest of 8% per annum and is payable twenty-four months from the date
of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. In addition
the Company issued the director warrants to purchase 100,001 shares of common
stock with an exercise price of $1.00 per share for two years from the date of
the note. The loan is unsecured and due July 5, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 111%, risk-free interest rate of 4.99%, and expected warrant life
of two years. The fair value of the warrants on the date of issuance was $7,291.
The Company will amortize the value over the term of the note. As of
December 31, 2007 the Company recorded and accrued interest expense of $3,923
and amortization expense of $1,823 related to the note.
(E)
Common Stock Warrants
The
Company issued 765,146 warrants during 2004, at an exercise price of $1.00 per
share to a consultant for services. The fair value of the warrants was estimated
on the grant date using the Black-Scholes option pricing model as required under
SFAS 123 with the following weighted average assumptions: expected dividend
yield 0%, volatility 0%, risk-free interest rate of 3.5%, and expected warrant
life of one year. The fair value was immaterial and therefore no expense was
recorded in general and administrative expense at the grant date. As of December
31, 2006, the warrants have expired.
In
connection with the issuance of a $100,000 note payable on June 28, 2006, the
Company issued a total of 100,000 common stock warrants with an exercise price
of $1.50 per share. The warrants expired June 29, 2007. The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model as required under SFAS 123R with the following weighted average
assumptions: expected dividend yield 0%, volatility 0%, risk-free interest rate
of 5.18%, and expected warrant life of one year. The fair value was immaterial
and therefore no expense was recorded.
In
connection with the conversion of $205,000 of notes payable to common stock on
July 24, 2006 the Company issued warrants with a cashless exercise provision to
purchase an aggregate of 51,250 shares of our common stock to the Holders
exercisable within one year of issuance at a price per share of $1.50 (the
“Conversion Warrants”). The Conversion Shares and shares underlying the
Conversion Warrants are restricted in accordance with Rule 144 promulgated under
the Securities Act of 1933, as amended. These warrants expired during the
quarter ended September 30, 2007
In
connection with the issuance of common stock units for cash and services, the
Company has an aggregate of 2,403,197 and 2,154,896 warrants outstanding at
December 31, 2007 and 2006, respectively. The Company has reserved 2,821,692
shares of common stock for the future exercise of the warrants at December 31,
2007.
(F)
Amendment to Articles of Incorporation
During 2004, the Company
amended its Articles of Incorporation to provide for an increase in its
authorized share capital. The authorized capital stock increased to 100,000,000
common shares at a par value of $0.01 per share.
(G)
Financing Agreement
On May
29, 2007, the Company entered into an Investment Agreement. Pursuant
to this Agreement, the Investor shall commit to purchase up to
$20,000,000 of the Company's common stock over the course of thirty-six (36)
months. The amount that we shall be entitled to request from each purchase
(“Puts”) shall be equal to, at the Company's election, either (i) up to $250,000
or (ii) 200% of the average daily volume (U.S. market only) of the common stock
for the three (3) trading days prior to the applicable put notice date,
multiplied by the average of the three (3) daily closing bid prices immediately
preceding the put date. The put date shall be the date that the Investor
receives a put notice of a draw down by us. The purchase price shall be set at
ninety-four percent (94%) of the lowest closing bid price of the common stock
during the pricing period. The pricing period shall be the five (5) consecutive
trading days immediately after the put notice date. There are put restrictions
applied on days between the put date and the closing date with respect to that
particular Put. During this time, we shall not be entitled to deliver another
put notice. Further, we shall reserve the right to withdraw that portion of the
Put that is below seventy-five percent (75%) of the lowest closing bid prices
for the 10-trading day period immediately preceding each put notice. The Company
was obligated to pay $15,000 preparation fee for the documents. $10,000 of which
was paid upon the execution of the agreement and $5,000 was
paid upon the closing of the first put.
The
Company filed a registration statement with the Securities and Exchange
Commission (“SEC”) covering 15,000,000 shares of the common stock underlying the
Investment Agreement. In addition, the Company is obligated to use
all commercially reasonable efforts to have the registration statement declared
effective by the SEC within 90 days after the closing date. The Company will
have an ongoing obligation to register additional shares of our common stock as
necessary underlying the drawdowns.
During
the year ended December 31, 2007 the Company drew down a total
of $47,188 and issued a total of 338,600 shares of common
stock
NOTE 9
RELATED
PARTY TRANSACTIONS
In June
2006, a director of the Company loaned the Company $100,000. The loan bears a
rate of interest of 8% per annum and is payable twelve months from the date of
issuance. In addition the Company issued the director warrants to purchase
100,000 shares of common stock with an exercise price of $1.50 per share for one
year from the date of the note. The loan is unsecured and was due June 28, 2007.
The note was extended until June 28, 2008. In December 2006, the
Director loaned the Company an additional $50,000. The loan bears a rate of
interest of 8% per annum and is payable eighteen months from the date of
issuance. In January 2007 a director of the Company loaned the Company $50,000.
The loan bears interest at a rate of eight percent per annum. The loan is
unsecured and due July 31, 2008. As of December 31, 2007, the Company has an
outstanding balance under the three note agreements of $200,000 and recorded
accrued interest expense of $20,797 related to these three notes.
In May
2007, a Director of the Company loaned the Company $50,000. The loan bears a
rate of interest of 8% per annum and is payable twenty-four months from the date
of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. In addition
the Company issued the director warrants to purchase 25,000 shares of common
stock with an exercise price of $1.00 per share for two years from the date of
the note. The loan is unsecured and due May 17, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life
of two years. The value of the warrants on the date of issuance was $837. The
Company will amortize the value over the term of the note. In June, 2007 the
Mother of the Director loaned the Company an additional $40,000. The loan bears
a rate of interest of 8% per annum and is payable twenty-four months from the
date of issuance. The holder of the note has the right to convert the note into
common stock of the Company at the market value on the date of conversion but
not at a price less than $.20 per share of common stock. The loan is unsecured
and due July 3, 2009. The fair value of the warrants was estimated on the
grant date using the Black-Scholes option pricing model with the following
weighted average assumptions: expected dividend yield 0%, volatility 103%,
risk-free interest rate of 4.87%, and expected warrant life of two years. The
fair value of the warrants on the date of issuance was $669. The Company will
amortize the value over the term of the note. In November 2007, a Director of
the Company loaned the Company an additional $50,000. The loan bears a rate of
interest of 10% per annum and is payable twenty-four months from the date of
issuance. The holder of the note has the right to convert the note into common
stock of the Company at the market value on the date of conversion but not at a
price less than $.11 per share of common stock. In addition the
Company issued the director warrants to purchase 454,550 shares of common stock
with an exercise price of $.50 per share for two years from the date of the
note. The loan is unsecured and due November 25, 2009.The fair value of the
warrants was estimated on the grant date using the Black-Scholes option pricing
model with the following weighted average assumptions: expected dividend yield
0%, volatility 134%, risk-free interest rate of 2.92%, and expected warrant life
of two years. The value of the warrants on the date of issuance was $19,351. The
Company will amortize the value over the term of the note. As
December 31, 2007 the Company recorded and accrued interest expense of $4,614
and amortization expense of $1,235 related to these three notes.
During
December 2001, the Company entered into an agreement with a consultant to serve
as its interim President for a term of up to five years. The agreement called
for annual compensation of $250,000. The agreement expires the earlier of
December 2006 or on the effectiveness of an employment agreement and is
renewable annually after December 2006. During 2006, the Company approved a
one-year renewal of the agreement. The Company has accrued $427,493 under the
agreement to the consultant at December 31, 2007. For the Period November 6,
2001(Inception) to December 31, 2007 the Company recorded $1,520,833 of expenses
associated with this agreement.
During
2004, the Company entered into an employment agreement with a consultant to
assume the position of Chief Executive Officer and President for a term of five
years at an annual minimum salary of $250,000 with additional bonuses and fringe
benefits. The agreement is to become effective upon the approval by the
Securities and Exchange Commission on the SB-2 Registration Statement. During
March 2006, the Company and the President amended the start date to begin upon
the Company raises all or substantially all the project funding pertaining to
the first facility. As of the date of this report, the Company has not completed
the funding. (See Note 10(A) and 12).
NOTE 10
COMMITMENTS
AND CONTINGENCIES
(A) Consulting
Agreements
During
December 2001, the Company entered into an agreement with a consultant to serve
as its interim President for a term of up to five years. The agreement called
for annual compensation of $250,000. The agreement expires the earlier of
December 2006 or on the effectiveness of an employment agreement and is
renewable annually after December 2006. During 2006, the Company approved a
one-year renewal of the agreement. The Company has accrued $427,493 under the
agreement to the consultant at December 31, 2007. For the Period November 6,
2001(Inception) to December 31, 2007 the Company recorded $1,520,833 of expenses
associated with this agreement.
During
April 2002, the Company entered into an agreement with a consultant to provide
services for a period of one year. The agreement called for compensation of
100,000 units with a fair value of $50,000 based on recent cash offerings ($0.50
per share). The Company recorded $16,667 and $33,333 of consulting expense for
the years ended December 31, 2003 and 2002, respectively.
During
May 2002, the Company entered into an agreement with a consultant to provide
services for a period of two months. The agreement called for compensation of
12,710 units, each unit consists of one share of common stock and one common
stock warrant exercisable at $1.00 per share for a period of two years. The
units had a fair value of $6,355 based on recent cash offerings. The Company
recorded consulting expense of $6,355 for the year ended December 31, 2002
($0.50 per share).
During
June 2002, the Company entered into an agreement with a consultant to provide
services for a period of one year. The agreement called for cash payments
totaling $120,000. The Company recorded $55,000 and $65,000 of consulting
expense for the years ended December 31, 2003 and 2002,
respectively.
During
July 2002, the Company entered into an agreement with a consultant to provide
services for a period of one year. The agreement called for compensation of
100,000 units, each unit consists of one share of common stock and one common
stock warrant exercisable at $1.00 per share for a period of two years. The
units had a fair value of $50,000 based on recent cash offerings. The Company
recorded $27,083 and $22,917 of consulting expense for the years ended December
31, 2003 and 2002, respectively ($0.50 per share). The agreement was fully
expensed as of December 31, 2003.
During
January 2004, the Company entered into a consulting agreement with a consultant
to provide management and public relations services. The agreement calls for the
consultant to provide services for a period of one year and the consultant to
receive: 200,000 shares of common stock, monthly retainers of $4,000, warrants
to purchase 100,000 shares of common stock at an exercise price of $5.00 for a
period of three years, and an option to purchase 100,000 shares of common stock
at an exercise price of $7.50 for a period of three years. The common stock has
a fair value of $100,000 based on recent cash offerings and will be amortized
over the life of the agreement ($0.50 per share) (See Note 7(A)).
In
January 2005, the Company entered into a consulting agreement with a consultant
to provide management and public relations services. The agreement calls for the
consultant to provide services for a period of one year and the consultant to
receive compensation of $2,000 per month. In addition the Company sold the
consultant 300,000 shares of common stock for cash proceeds of $300 and recorded
the fair value of the common stock of $149,700. The fair value of the common
stock will be recognized over the term of the agreement. For the year ended
December 31, 2005, the Company has recognized consulting expense of $143,463
under the agreement. During the year ended December 31, 2006, the Company has
recognized consulting expense of $6,237 under the agreement.
In March
2007, the Company entered into a consulting agreement with a consultant to
provide management and public relations services. The agreement calls for the
consultant to provide services for a period of one year and the consultant to
receive compensation of $4,000 per month. In addition the Company sold the
consultant 300,000 shares of common stock for cash proceeds of $300 and recorded
the fair value of the common stock of $153,000. The fair value of the common
stock will be recognized over the term of the agreement. The Company has also
agreed to pay the public relation firm a 5% finder fee for any business or
capital raise derived from its relationship with the public relations firm. The
fair value of the common stock will be recognized over the term of the
agreement. For the year ended December 31, 2007 the Company recorded an expense
of $125,198 under this agreement and deferred compensation of
$27,502.
In
July 2007, the Company entered into a consulting agreement with a consultant to
provide public relations services. The agreement calls for the consultant to
provide services for a period of one month and the consultant to receive
compensation of 278,000 shares of common stock with the fair value of the common
stock of $83,400 ($.30 per share). The fair value of the common stock will be
amortized over the term of the agreement. For the year ended December 31, 2007
the Company recorded an expense of $83,400 under this
agreement.
In
November 2007, the Company entered into a consulting agreement with a consultant
to provide public relations services. The agreement calls for the consultant to
provide services for a period of six months and the consultant to
receive compensation of 240,000 shares of common stock with the fair value of
the common stock of $36,000 ($.15 per share). The fair value of the common stock
will be amortized over the term of the agreement. For the year ended December
31, 2007 the Company recorded an expense of $9,600 under this agreement and
deferred compensation of $26,400.
In
December 2007, the Company entered into a consulting agreement with a consultant
to provide public relations services. The agreement calls for the consultant to
provide services for a period of six months and the consultant to receive
compensation of 500,000 shares of common stock with the fair value of the common
stock of $50,000 ($.10 per share) per month. . In March 2008 the Company entered
into a settlement agreement whereby the consultant acknowledged that no services
had been performed on behalf of the Company and that all stock issued to them
was returned and cancelled by Company.
(B) License
Agreement
Upon
effectiveness of the employment agreement with our Chief Executive Officer and
President, the Company will be entitled to use certain technology and know-how
that is owned by our Chief Executive Officer and President royalty free until
the end of the employment agreement. Upon termination of the employment
agreement with the Chief Executive Officer and President, the Company has the
right to license the technology for a onetime fee. The license fee will be
negotiated by the Company and the Chief Executive Officer and will equal the
replacement value of such technology and will be determined with reference to
the engineer's opinion dated March 6, 2002, a copy of which is attached to the
employment agreement (See Note 6(A)).
(C) Employment
Agreement
During
2004, the Company entered into an employment agreement with a consultant to
assume the position of Chief Executive Officer and President for a term of five
years at an annual minimum salary of $250,000 with additional bonuses and fringe
benefits. The agreement is to become effective upon the approval by the
Securities and Exchange Commission on the SB-2 Registration Statement. During
March 2006, the Company and the President amended the start date to begin upon
the Company raises all or substantially all the project funding pertaining to
the first facility. As of the date of this report, the Company has not completed
the funding. (See Note 9(A) and 11).
(D) Rescission
Offer
Common
stock sold prior to July 1, 2005 pursuant to the Company's private placement
offer may be in violation of the requirements of the Securities Act of 1933. In
October 2005, the Company became aware that the private placement offers made
prior to July 1, 2005 may have violated federal and state securities laws based
on the inadequacy of the Company's disclosures made in its offering documents
for the units concerning the lack of unauthorized shares. Under state securities
laws the investor can sue us to recover the consideration paid for the security
together with interest at the legal rate, less the amount of any income received
from the security, or for damages if he or she no longer owns the security or if
the consideration given for the security is not capable of being returned.
Damages generally are equal to the difference between the purchase price plus
interest at the legal rate and the value of the security at the time it was
disposed of by the investor plus the amount of any income, if any, received from
the security by the investor. Generally, certain state securities laws provide
that no suit can be maintained by an investor to enforce any liability created
under certain state securities statues if the seller makes a written offer to
refund the consideration paid together with interest at the legal rate less the
amount of any income, if any, received on the security or to pay damages and the
investor refuses or fails to accept the offer within a specified period of time,
generally not exceeding 30 days from the date the offer is received. In
addition, the various states in which the purchasers reside could bring
administrative actions against as a result of the rescission offer.
The
remedies vary from state to state but could include enjoining us from further
violations of the subject state law, imposing civil penalties, seeking
administrative assessments and costs for the investigations or bringing suit for
damages on behalf of the purchaser.
There is
considerable legal uncertainty under both federal securities and related laws
concerning the efficacy of rescission offers and general waivers with respect to
barring claims that would be based on the failure to disclose information
described above in a private placement. The SEC takes the position that
acceptance or rejection of an offer of rescission may not bar stockholders from
asserting claims for alleged violations of federal securities laws. Further,
under California's Blue Sky law, which would apply to stockholders resident in
that state, a claim or action based on fraud may not be waived or prohibited
pursuant to a rescission offer. As a result, the rescission offer may not
terminate any or all-potential liability that we may have in connection with
that private placement. In addition, there can be no assurance that we will be
able to enforce the waiver we received in connection with the rescission offer
to bar any claims based on allegations of fraud or other federal or state law
violations that the rescission offer, may have, until the applicable statutes of
limitations have run.
Based on
potential violations that may have occurred under the Securities Act of 1933,
the Company made a rescission offer to investors who acquired the Company's
common stock prior to July 1, 2005. As such, the proceeds of $1,084,823 from the
issuance of 1,986,646 shares of common stock through July 1, 2005 have been
classified outside of equity in the balance sheet and classified as common stock
subject to rescission.
NOTE 11
GOING
CONCERN
As
reflected in the accompanying financial statements, the Company is in the
development stage with no operations, a stockholders' deficiency of $2,007,324 a
working capital deficiency of $710,102 and used cash in operations from
inception of $1,849,869. This raises substantial doubt about its ability to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent on the Company's ability to raise additional capital and
implement its business plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
Management
believes that actions presently being taken to obtain additional funding and
implement its strategic plans provide the opportunity for the Company to
continue as a going concern.
NOTE 12
SUBSEQUENT
EVENTS
From January
to March 2008, the Company sold a total of 499,000 shares of common stock for
gross proceeds of $93,852 ($.18) per share.
On
December 17, 2007, The Company entered into a marketing agreement with a
consulting firm to investor relations.
The
Company agreed to issue them 500,000 shares of common stock monthly. The term of
the Marketing Agreement began December 10, 2007 and ends June 30,
2008. On March 26, 2008 the Marketing Agreement was canceled as no
services had been performed. The consulting firm returned all shares
of common stock it received from the Company.
On
January 15, 2008 and February 1, 2008 The Company entered into an investor
relations/public relations agreement two consultants. The Company had
agreed to issue each consultant a total of 1,500,000 shares of common
stock.
On
March 4, 2008
the Company
canceled the Agreements as
no services had been performed and the Company had not issued any shares of
common stock.
Item 8.
Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None.
Item
8A.
Controls and
Procedures
Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.
Management’s Report on
Internal Controls over Financial Reporting
Internal
control over financial reporting is a process to provide reasonable assurance
regarding the reliability of consolidated financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. There has been no change in
the Company’s internal control over financial reporting during the year ended
December 31, 2007 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
The
Company’s management, including the Company’s CEO and CAO, does not expect that
the Company’s disclosure controls and procedures or the Company’s internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of the
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in
Internal Control – Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management concluded that the
company’s internal control over financial reporting was effective as of December
31, 2007.
Item
8B.
Other Information
Rescission
Offer
Background
In
November 2005, we concluded a rescission offer to certain purchasers of our
securities. Between April 1, 2002 and July 1, 2005, we conducted several private
offerings of our securities. Between April 2002 and June 2004, we conducted a
private offering of units consisting of one share of common stock and warrants
to purchase common stock at a price per unit of $0.50 (the "Initial Offering").
Pursuant to the Initial Offering, we issued an aggregate of 1,803,646 shares of
our common stock and warrants to purchase an aggregate of 1,803,646 common
shares. We raised a total of $901,823 in the Initial Offering. Between March
2005 and July 1, 2005, we conducted a private offering of shares of our common
stock at a price per share of $1.00 (the "Second Offering"). Pursuant to the
Second Offering, we issued an aggregate of 183,000 shares of our restricted
common stock. We raised a total of $183,000 in the Second Offering.
Upon the
completion of the Initial Offering, we discovered that our authorized
capitalization was not sufficient to permit us to issue the common share
component of the units to the investors. We amended our Certificate of
Incorporation on July 1, 2004 to increase our authorized shares of common stock
to 100,000,000 common shares, which enabled us to undertake the Initial Offering
with sufficient authorized capitalization.
However,
both the Initial Offering and Second Offering violated federal securities laws
based on the inadequacy of our disclosures made in our offering documents
concerning the lack of authorized common stock.
Based on
potential violations that may have occurred under U.S. securities laws, we
determined to make a rescission offer both to investors who acquired our units
pursuant the Initial Offering as well as to investors in our Second Offering,
since they were not informed of the rescission offer. The rescission offer was
conducted privately in October 2005 and November 2005.
If all
eligible investors had elected to accept the rescission offer, we would have
been required to refund investments totaling $1,084,823, plus interest on those
funds from the date of investment through the date of the acceptance of the
rescission offer at 6% per annum. None of the investors accepted the rescission
offer which expired on December 8, 2005.
Potential
Liabilities
Our
failure to disclose the lack of sufficient authorized capital and the rescission
offer made to the earlier investors in our private placement to the later
investors created certain liabilities for us under federal securities and
related laws. Generally, under state securities laws the investor can sue us to
recover the consideration paid for the security together with interest at the
legal rate, less the amount of any income received from the security, or for
damages if he or she no longer owns the security or if the consideration given
for the security is not capable of being returned. Damages generally are equal
to the difference between the purchase price plus interest at the legal rate and
the value of the security at the time it was disposed of by the investor plus
the amount of any income, if any, received from the security by the investor.
Generally, certain state securities laws provide that no suit can be maintained
by an investor to enforce any liability created under certain state securities
statues if the seller makes a written offer to refund the consideration paid
together with interest at the legal rate less the amount of any income, if any,
received on the security or to pay damages and the investor refuses or fails to
accept the offer within a specified period of time, generally not exceeding 30
days from the date the offer is received.
We
believe that by making the rescission offer, the likelihood of potential
contingent liability of our company for a violation of federal securities or
related laws to our stockholders who did not accept the rescission offer may be
substantially reduced, but not necessarily terminated. However, as a result of
the possible failure to comply with the disclosure obligations described above,
our liability to our stockholders who fail to accept the rescission offer, or
who make no election as to the rescission offer, may continue for a period of
time until the applicable statutes of limitations have run. The applicable
statutes of limitations vary from state to state and under federal law, the
longest of which would be for up to three years from the occurrence of the
violation. Additionally, any existing rights for rescission or damages under
applicable securities or related laws of any of our stockholders may survive and
not be barred by our making the rescission.
In
addition, the various states in which the purchasers reside could bring
administrative actions against as a result of the rescission offer. The remedies
vary from state to state but could include enjoining us from further violations
of the subject state law, imposing civil penalties, seeking administrative
assessments and costs for the investigations or bringing suit for damages on
behalf of the purchaser.
There is
considerable legal uncertainty under both federal securities and related laws
concerning the efficacy of rescission offers and general waivers with respect to
barring claims that would be based on the failure to disclose information
described above in a private placement. The SEC takes the position that
acceptance or rejection of an offer of rescission may not bar stockholders from
asserting claims for alleged violations of federal securities laws. Further,
under California’s Blue Sky law, which would apply to stockholders resident in
that state, a claim or action based on fraud may not be waived or prohibited
pursuant to a rescission offer. As a result, the rescission offer may not
terminate any or all potential liability that we may have in connection with
that private placement. In addition, there can be no assurance that we will be
able to enforce the waiver we received in connection with the rescission offer
to bar any claims based on allegations of fraud or other federal or state law
violations that the rescission offerees may have, until the applicable statutes
of limitations have run.
We are
also subject to compliance with the General Corporation Law of Delaware, the
state of our incorporation, with respect to the rescission offer. While the
General Corporation Law of Delaware does not address the issue of rescissions in
relation to capital impairment matters, we do not believe that any payments made
in relation to the rescission offer will represent proscribed transactions based
on any of the statutory references relevant to capital impairment. There is
nothing in the related laws and interpretation of the Delaware General
Corporation Law which would classify a rescission offer as a stock redemption
given that we did not seek to repurchase or redeem the shares, but rather
afforded investors a right to treat their prior purchase as a
nullity.
Our
financial statements reflect that we have the amounts attributable to the
private placement have been segregated on our balance sheet from our capital.
Consequently, any payments resulting from the rescission offer are not derived
from the capital segment of our financial statements and should not be deemed
impairment of capital. In effect, any payments would be in the nature of
settlements of obligations rather than redemption or similar retirements of
capital.
PART III
Item 9.
Directors and Executive Officers of the
Registrant
The
directors and executive officers of the Company are:
|
Name
|
Age
|
Position/Date
|
|
|
|
|
|
Peter
Vaisler
|
57
|
Director,
President, Chief Executive Officer; as of November 2001
Principal
Financial Officer, Principal Accounting Officer; as of February
2005
|
|
|
|
|
|
David
Williams
|
65
|
Director;
as of January 2004
|
|
|
|
|
|
Walter
Martin
|
65
|
Director;
as of January 2004
|
PETER VAISLER
has been the
President, CEO and Director of Alliance Recovery Corporation since inception
November 2001. On February 11, 2005, he became our principal financial officer
and principal accounting officer. Since 1995, Mr. Vaisler and a team of
third party engineers and scientists have been working to develop the ARC Unit
by integrating existing manufacturing and energy components into a single
process system to thermally reduce waste rubber to a fuel oil for use as a
feedstock to generate electricity. Using knowledge gleaned from research and
development projects by several U.S. and international groups, Mr. Vaisler
and his team applied existing chemical manufacturing processes to thermally
reduce rubber to fuel oil for energy production. A by-product of the ARC thermal
reduction of rubber to fuel oil is a commercial grade of carbon black.
Mr. Vaisler and his team also developed and implemented strategies related
to site selection, regulatory affairs, permitting and communications with a view
to refining the business concept to the point that installation of the ARC Unit
could be accomplished in various U.S. jurisdictions. Mr. Vaisler managed
the engineering team and coordinated design and fabrication activities
addressing technical refinements to the integration of “off-the-shelf” system
components that will be purchased by Alliance for the first
installation.
From 1979
to 1985, Mr. Vaisler was a senior executive for Topaz Foods Limited based
in St. Thomas, Ontario, Canada. He was responsible for project management with a
Canadian food manufacturer coordinating the design, installation, and start-up
of a new manufacturing process, including conveyance and packaging machinery
innovations. As a Project Manager, Mr. Vaisler coordinated the activities
of European based engineers & fabricators, and North American contractors in
connection with the use of fractional evaporators for manufacture of fruit and
berry concentrates.
From 1986
to 1989, Mr. Vaisler worked for Corporate Planning Consultants based in
London, Ontario, Canada. He assisted in technology based industries and health
care institutions with the commercialization of technological innovations. As
part of his responsibilities, Mr. Vaisler initiated technical and business
activities pertaining to biomedical waste disposal utilizing “state-of-the-art”
incinerators. His interest in the thermal reduction of rubber waste to fuel oil
commenced during this period in his career.
In
November 1989, Mr. Vaisler joined Conjoint Export Services. As Director of
International Trade Development for a Canadian and U.S. initiative, he provided
export market management services to primarily technology based manufacturers
seeking both export and import market growth. Mr. Vaisler commenced his
activities pertaining to the development of the ARC Unit in 1994.
Mr. Vaisler obtained a Bachelor of Arts degree from the University of
Western Ontario in 1974.
DAVID
WILLIAMS
has been our
director since 2004. He has business experience in the area of Investment
Management. Mr. Williams graduated from Bishops University in Quebec,
Canada in 1963 with a Bachelor of Business Administration, gaining his Masters
in Business Administration from Queens’ University in Kingston, Ontario in 1964
and later was a recipient of a Doctor of Civil Laws from Bishops in
1996.
David Williams has been involved in the
investment management business for over 30 years with experience in corporate
finance. David began his career in the investment business as a bond and money
market trader. From 1966, he acted as an investment analyst and portfolio
manager with Hodgson, Roberton, Laing and Company, one of Canada’s oldest
investment counseling firms. Mr. Williams’ responsibilities included;
equity and fixed income analysis and management of personal investment
portfolios. In 1966 David joined, and later became a senior partner of, Beutel
Goodman and Company, a value management company dealing in equity and fixed
income assets, with $30 million under management. Mr. Williams, along with
several partners, successfully built the company to the point where it had $11.6
billion under management in 1993. David’s responsibilities over the years have
included managing substantial institutional portfolios as well as extensive
marketing and client liaison work with many of the firms’ most important clients
demonstrating a large capacity for managing large portfolios. He ceased working
for Beutel, Goodman and Company in December 1993. He has been managing
Roxborough Holdings Limited since February 1994.
Mr. Williams
currently includes charitable and special interests programs in his daily
activities while remaining on the Board of Directors of such companies as:
Bennett Environmental Inc. (TSX listed) ) which specializes in thermal treatment
of contaminated soil; MetroOne Telecommunications Inc. (NASDAQ listed) which
provides major telephone companies with enhanced directory services; and ReFocus
Group Inc. (OTC BB listed) which is a medical treatment device company
specializing in vision disorders.
Mr. Williams’
past directorships include: Drug Royalty Corporation Inc. which specializes in
medical devices and pharmaceutical products; Equisure Financial Inc., a company
involved in general and life insurance as well as financial planning; and Duff
& Phelps LLC, a NASDAQ listed company with interest in middle market mergers
and acquisitions.
Mr. Williams
currently continues to manage Roxborough Holdings Ltd., a family owned private
equity holding company which is an equity investor in a variety of private and
public companies.
WALTER MARTIN
has been our
director since 2004. Walter Martin brings more than two decades of corporate
finance experience to the Company. Mr. Martin began his career with
Versatile Investments before moving to Brightside Financial Corporation. In 1983
as one of three founders of Brightside Financial Mr. Martin helped built
the Company to hold over 160 sales advisors administering over $1 Billion when
it was sold to Assante Corporation. Mr. Martin continued to work for
Assante Corporation after its buyout by Brightside until its full integration.
From 1996 to the present, Mr. Martin has worked for Assante Corp., a
financial planning firm based in Canada. He was a Vice President from 1996-2002,
and a consultant from 2002 to the present. Mr. Martin currently sits as a
member on the board of three companies in the software and mutual fund
industries, as well as a charitable company serving refugees.
Term of
Office
Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
All
officers and directors listed above will remain in office until the next annual
meeting of our stockholders, and until their successors have been duly elected
and qualified. There are no agreements with respect to the election of
Directors. We have not compensated our Directors for service on our Board of
Directors, any committee thereof, or reimbursed for expenses incurred for
attendance at meetings of our Board of Directors and/or any committee of our
Board of Directors. Officers are appointed annually by our Board of Directors
and each Executive Officer serves at the discretion of our Board of Directors.
We do not have any standing committees. Our Board of Directors may in the future
determine to pay Directors’ fees and reimburse Directors for expenses related to
their activities.
None of
our Officers and/or Directors have filed any bankruptcy petition, been convicted
of or been the subject of any criminal proceedings or the subject of any order,
judgment or decree involving the violation of any state or federal securities
laws within the past five (5) years.
Audit
Committee
We do not
have a standing audit committee of the Board of Directors. Management has
determined not to establish an audit committee at present because of our limited
resources and limited operating activities do not warrant the formation of an
audit committee or the expense of doing so. We do not have a financial expert
serving on the Board of Directors or employed as an officer based on
management’s belief that the cost of obtaining the services of a person who
meets the criteria for a financial expert under Item 401(e) of Regulation S-B is
beyond its limited financial resources and the financial skills of such an
expert are simply not required or necessary for us to maintain effective
internal controls and procedures for financial reporting in light of the limited
scope and simplicity of accounting issues raised in our financial statements at
this stage of our development.
Certain Legal
Proceedings
No
director, nominee for director, or executive officer has appeared as a party in
any legal proceeding material to an evaluation of his ability or integrity
during the past five years.
Compliance With Section
16(A) Of The Exchange Act.
Section
16(a) of the Exchange Act requires the Company’s officers and directors, and
persons who beneficially own more than 10% of a registered class of the
Company’s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. During 2006, Form 3’s were filed by each officer,
director and 10% or greater shareholder. To the best of the Company’s knowledge,
no other reports are required to be filed. However, the Form 3 filings
undertaken in 2006 do not agree with the Company’s transfer agent records. The
Company is looking into its discrepancy and will make the appropriate filings
upon determining what the discrepancy is in the fiscal year ending December 31,
2008.
Code Of
Ethics
The
company has adopted a Code of Ethics applicable to its Chief Executive Officer
and Principal Financial Officer. The Code of Ethics was filed with our Form
10-KSB for the year ending December 31, 2005 as Exhibit 14 (SEC File No.
333-121659).
Item 10.
Executive
Compensation
Compensation of Executive
Officers
Summary Compensation Table.
The following table sets forth information concerning the annual and long-term
compensation awarded to, earned by, or paid to the named executive officer for
all services rendered in all capacities to our company, or any of its
subsidiaries, for the years ended December 31, 2007, 2006 and 2005:
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
Option
Stocks/Payouts Awarded
|
|
Peter
Vaisler
Director,
CEO
|
2007
|
$250,000
(1)
|
0
|
11,436
(2)
|
0
|
|
2006
|
$250,000
(1)
|
0
|
10,236
(3)
|
0
|
|
2005
|
$250,000
(1)
|
0
|
0
|
0
|
|
|
(1)
|
Represents
non-salary compensation pursuant to Mr. Vaisler’s consulting
agreement with us. Please note that Mr. Vaisler has accrued, but
deferred such compensation and as noted below, his actual employment
agreement will not become effective until the date on which we raise all,
or substantially all, of the project financing pertaining to the
construction of our first facility. Please also note that the other annual
compensation
|
|
(2)
|
Represents
a monthly car allowance of $953.00 provided to Mr. Vaisler in accordance
with his consulting agreement with
us.
|
|
(3)
|
Represents
a monthly car allowance of $853.00 provided to Mr. Vaisler in accordance
with his consulting agreement with
us.
|
Consulting
Agreement
We have a consulting agreement, as
amended, with Peter Vaisler, who is also our President and Chief Executive
Officer. The consulting agreement, as amended, calls for Mr. Vaisler to
provide technology that he has developed for us, along with the use of his
know-how and industry contacts to facilitate the realization of our business
objectives. Mr. Vaisler will be paid $250,000 annually for his consulting
services. The consulting agreement, as amended, commenced on December 1, 2001
and will expire upon the date on which we raise all, or substantially all, of
the project financing pertaining to the construction of our first facility. At
such time, the Employment Agreement, as set forth below, will
commence.
Employment
Agreement
We have a
five-year employment agreement with Mr. Vaisler to act as our President and
Chief Executive Officer on a full-time basis. The agreement was originally to
commence on the date on which our SB-2 Registration Statement was declared
effective by the SEC. However, the Employment Agreement was amended to commence
upon on the date on which we raise all, or substantially all, of the project
financing pertaining to the construction of our first facility. The Employment
Agreement will expire five years from such date. The annual base salary is
$250,000 with additional cash compensation as defined in the agreement. He also
receives an automobile allowance, and we shall use our best efforts to maintain
Director’s and Officer’s liability insurance. We will also provide contributions
to any self-directed employee benefit plan. While employed by us,
Mr. Vaisler will provide us with certain technology at no cost to us until
the end of the employment term. In the event Mr. Vaisler is no longer
employed by us, the technology that he has provided to us may be used by us for
a one time fee equal to the current replacement value of such technology
determined by an engineer’s opinion acceptable to both parties. We may terminate
Mr. Vaisler’s employment agreement for “cause.” Either party may terminate
the employment agreement with thirty (30) days prior written notice to the other
party.
Compensation of
Directors
Directors
are permitted to receive fixed fees and other compensation for their services as
directors. The Board of Directors has the authority to fix the compensation of
directors. No amounts have been paid to, or accrued to, directors in such
capacity.
Item 11.
Security Ownership of Certain
Beneficial Owners and Management
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth the number and percentage of shares of our common
stock owned as of December 31, 2007 by all persons (i) known to us who own more
than 5% of the outstanding number of such shares, (ii) by all of our directors,
and (iii) by all officers and directors of us as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.
|
Title
of Class
|
Name
and Address
of
Beneficial Owner
|
Amount
and Nature of Beneficial Owner (1)
|
Percent
of
Class (2)
|
|
|
|
|
|
|
Common
Stock
|
Peter
Vaisler (3)
1133
St. Anthony Road
London,
Ontario, Canada N6H 2P9
|
7,750,000
|
37.64%
|
|
|
|
|
|
|
Common
Stock
|
David
Williams (4)
45
St. Claire Avenue West, Suite 1202
Toronto,
ON M4V 1K9
|
2,924,160
|
14.20%
|
|
|
|
|
|
|
Common
Stock
|
Walter
Martin
20
Sandpiper Ct.,
Elmira,
ON N3B 3C5
|
306,667
|
1.48%
|
|
|
|
|
|
|
Common
Stock
|
Suzy
Jafine (In Trust) (5)
80
West Drive
Brampton,
Ontario, Canada L6T 3T6
|
1,450,000
|
7.04%
|
|
|
|
|
|
|
Officers
and Directors
As
a Group (3 persons)
|
|
12,430,827
|
60.37%
|
|
(1)
|
All
of the persons are believed to have sole voting and investment power over
the shares of common stock listed or share voting and investment power
with his or her spouse, except as otherwise provided. The amounts listed
in this column represent the total amount of (i) shares currently held by
each shareholder; and, (ii) shares issuable pursuant to the exercise of
options held by such shareholder.
|
|
|
|
|
(2)
|
For
purposes of this table only, this percentage is based on 20,589,425 shares
of our common stock issued and outstanding as of December 31,
2007.
|
|
|
|
|
(3)
|
Mr. Vaisler
owns his shares through Emerald City Corporation, S.A., a corporation
domiciled in Costa Rica. Mr. Vaisler does not own any rights to
options, warrants, rights, conversion privileges or any other similar
obligations.
|
|
|
|
|
(4)
|
Mr.
Williams owns his shares through Roxborough Holdings Limited, a
corporation domiciled in Ontario, Canada. Roxborough Holdings Limited owns
2,712,080 shares of our common stock and warrants to purchase an
additional 112,080 shares of our common stock at an exercise price of
$1.00 per share. In addition, Mr. Williams owns warrants to purchase
100,000 shares of our common stock at $1.50 per share.
|
|
|
|
|
(5)
|
The
shares held by Suzy Jafine are not in a voting trust. Ms. Jafine does
not own any rights to options, warrants, rights, conversion privileges or
any other similar obligations.
|
Item 12.
Certain Relationships and Related
Transactions
We have a
consulting agreement with Peter Vaisler. The Consulting Agreement, as amended,
calls for Mr. Vaisler to provide technology that he has developed for us,
along with the use of his know-how and industry contacts to facilitate the
realization of our business objectives. The Consulting Agreement, as amended,
commenced on December 1, 2001 and will expire upon the date on which we raise
all, or substantially all, of the project financing pertaining to the
construction of our first facility. To date, this has not occurred. At such
time, the Employment Agreement, as set forth below, will commence.
We have a
five-year employment agreement with Peter Vaisler to act as our President
and Chief Executive Officer on a full-time basis. The agreement was originally
to commence on the date on which our SB-2 Registration Statement was declared
effective by the SEC. However, the Employment Agreement was amended to commence
upon on the date on which we raise all, or substantially all, of the project
financing pertaining to the construction of our first facility. The Employment
Agreement will expire five years from such date. The annual base salary is
$250,000 with additional cash compensation as defined in the agreement. He also
receives an automobile allowance, and we shall use our best efforts to maintain
Director’s and Officer’s liability insurance. We will also provide contributions
to any self-directed employee benefit plan. While employed by us,
Mr. Vaisler will provide us with certain technology at no cost to us until
the end of the employment term.
In the
event Mr. Vaisler is no longer employed by us, the technology that he has
provided to us may be used by us for a one time fee equal to the current
replacement value of such technology determined by an engineer’s opinion
acceptable to both parties. We may terminate Mr. Vaisler’s employment
agreement for “cause.” Either party may terminate the employment agreement with
thirty (30) days prior written notice to the other party.
In
February 2006, our director, David Williams, loaned us $100,000. The
loan is interest free for the first nine months and six percent interest for the
months through its maturity date of June 28, 2008.
Mr.
Walter Martin loaned us $50,000 on January 30, 2007 and another $50,000 on May
17, 2007. The promissory note executed on January 30, 2007 in
conjunction with the loan matures on January 30, 2009 and bears interest at a
rate of ten percent (10%) per annum on the principal balance until the
promissory note is paid in full. The convertible promissory note
executed in conjunction with the loan on May 17, 2007 matures on May 17, 2009
and bears interest at a rate of eight percent (8%) per annum on the principal
balance until the convertible promissory note is paid in full. As
additional consideration for the value received, we issued Mr. Martin 25,000
warrants, with each warrant entitling Mr. Martin to one share of our common
stock. The exercise price is $1.00 per share and the expiration date is May 17,
2009.
In
December 2006, our director, David Williams, loaned us $50,000. The
loan is interest free for the first nine months and six percent interest for the
months through its maturity date of June 30, 2008.
Mr.
Martin’s wife, Florence, loaned us $40,000 on June 29, 2007. The
convertible promissory note executed in conjunction with the loan matures on
July 3, 2009 and bears interest at a rate of eight percent (8%) per annum on the
principal balance until the convertible promissory note is paid in
full. As additional consideration for value received, we issued Ms.
Martin 20,000 warrants, with each warrant entitling Ms. Martin to one share of
our common stock. The exercise price is $1.00 per share and the expiration date
is June 29, 2009.
Jonathan
Brubacher loaned us $100,001 on July 5, 2007. The convertible
promissory note executed in conjunction with the loan matures on July 5, 2009
and bear interest at a rate of eight percent (8%) per annum on the principal
balance until the convertible promissory note is paid in full. As
additional consideration for value received, we issued Mr. Brubacher 100,001,
with each warrant entitling Mr. Brubacher to one share of our common stock. The
exercise price is $1.00 per share and the expiration date is July 5,
2009.
In
November 2008, Walter Martin loaned us $50,000. The convertible
promissory note matures on November 26, 2009 and bears interest at a rate of ten
percent (10%) per annum on the principal balance until the convertible
promissory note is paid in full. Pursuant to the terms of the
convertible promissory note, Mr. Martin shall have the right from time to time,
and at any time on or prior to the November 26, 2009 maturity date to convert
all or any part of the outstanding and unpaid principal amount of this Note into
fully paid and non-assessable shares of Common Stock, $.01 par value per
share. The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing the amount of principal
and accrued interest to be converted by the applicable Conversion Price then in
effect on the date specified in the notice of conversion. The
Conversion Price shall be equal to the closing bid price of the Common Stock on
the OTC Bulletin Board on the day prior to receipt by the Company of the
Conversion Notice..
PART IV
Item 13.
Exhibits List and Reports on Form
8-K
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
3.1
|
-
|
Certificate
of Incorporation with Amendments to Certificate of Incorporation
(1)
|
|
|
|
|
|
3.2
|
-
|
Bylaws
(1)
|
|
|
|
|
|
5.1
|
-
|
Opinion
of Anslow & Jaclin, LLP
|
|
|
|
|
|
10.1
|
-
|
Employment
Agreement between Alliance Recovery Corporation and Peter Vaisler
(1)
|
|
|
|
|
|
10.2
|
-
|
Consulting
Agreement between Alliance Recovery Corporation and Peter Vaisler
(1)
|
|
|
|
|
|
10.3
|
-
|
Amendment
to the Consulting Agreement between Alliance Recovery Corporation and
Peter Vaisler
|
|
|
|
|
|
10.4
|
-
|
Second
Amendment to the Consulting Agreement between Alliance Recovery
Corporation and Peter Vaisler
|
|
|
|
|
|
10.5
|
-
|
2007
Consulting Agreement with Mirador Consulting, Inc. (1)
|
|
|
|
|
|
10.6
|
-
|
Consulting
Agreement between Alliance Recovery Corporation and Global Consulting
Group, Inc. (6)
|
|
|
|
|
|
10.7
|
-
|
Amendment
to Employment Agreement between Alliance Recovery Corporation and Peter
Vaisler (2)
|
|
|
|
|
|
14
|
-
|
Code
of Ethics (4)
|
|
|
|
|
(1)
Incorporated by reference to Form SB-2 filed on December 27, 2004 (File No.
333-121659)
(2)
Incorporated by reference to Form 10-KSB filed on April 2, 2007 (File No.
333-121659)
(3)
Incorporated by reference to Form 8-K filed on May 29, 2007 (File No.
333-121659)
(4)
Incorporated by reference to Form 10-KSB filed on April 11, 2006 (File No.
333-121659)
(5)Incorporated
by reference to Form SB-2 filed on July 31, 2007 (File No.
333-144976)
(6) Incorporated
by reference to Amendment No. 2 to Form SB-2 filed on September 7, 2007 (File
No. 333-144976)
Item 14.
Principal Accountant Fees and
Services
Audit
Fees
For our
fiscal year ended December 31, 2007 and December 31, 2006, we were billed
approximately $21,589 and $17,644, respectively, for professional services
rendered for the audit and reviews of our financial
statements.
Tax Fees
For our
fiscal years ended December 31, 2007 and 2006, we were not billed for
professional services rendered for tax compliance, tax advice, and tax
planning.
All Other
Fees
We
incurred fees related to other services rendered by our principal accountant for
the fiscal years ended December 31, 2007 and 2006 of $0
and $0
respectively.
Please
note that our Board of Directors, acting as an audit committee, pre-approved our
auditor, Webb & Co. for the fiscal year ended December 31,
2007.
Audit and Non-Audit Service
Pre-Approval Policy
We
currently do not have an audit committee. However, our board of directors has
approved the services described above.
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, there unto duly authorized.
|
ALLIANCE
RECOVERY CORPORATION
|
|
|
|
|
By:
|
/s/
Peter Vaisler
|
|
|
PETER
VAISLER
|
|
|
Chief
Executive Officer
Principal
Financial Officer,
Principal
Accounting Officer
|
|
|
|
|
Dated:
|
April
15, 2008
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
Name
|
Title
|
Date
|
|
/s/ Peter
Vaisler
Peter
Vaisler
|
Chief
Executive Officer
Principal
Financial Officer,
Principal
Accounting Officer and Director
|
April
15, 2008
|
|
/s/ Walter
Martin
Walter
Martin
|
Director
|
April
15, 2008
|
|
|
|
|
|
/s/
David Williams
David
Williams
|
Director
|
April
15, 2008
|
30
Grafico Azioni Alliance Recovery (PK) (USOTC:ARVY)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni Alliance Recovery (PK) (USOTC:ARVY)
Storico
Da Feb 2024 a Feb 2025
