UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
________________________________________
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
________________________________________
Alliance
Recovery Corporation
(Exact
Name of Small Business Issuer in its Charter)
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DELAWARE
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30-0077338
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(State
of Incorporation)
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(Primary
Standard Classification Code)
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(IRS
Employer ID No.)
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390-1285
North Telegraph Road
Monroe,
MI 48162-3368
(519)
671-0417
(Address
and Telephone Number of Registrant’s Principal
Executive
Offices and Principal Place of Business)
Peter
Vaisler
390-1285
North Telegraph Road
Monroe,
MI 48162-3368
(519)
671-0417
(Name,
Address and Telephone Number of Agent for Service)
Copies of
communications to:
GREGG E.
JACLIN, ESQ.
ANSLOW
& JACLIN, LLP
195 Route
9 South, Suite 204
Manalapan,
NJ 07726
TELEPHONE
NO.: (732) 409-1212
FACSIMILE
NO.: (732) 577-1188
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Approximate Date of
Commencement of Proposed Sale to the Public:
from time
to time after the effective date of this Registration Statement as
determined by market conditions and other
factors.
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If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box:
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x
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If
this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
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o
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If
this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
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o
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If
this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
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o
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If
delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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o
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Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer
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o
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Accelerated
filer
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o
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Non-accelerated
filer
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o
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Smaller
reporting company
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x
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(Do
not check if a smaller reporting company)
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o
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CALCULATION
OF REGISTRATION FEE
Securities to
be Registered
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Aggregate
Offering Price (2)
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Common
Stock, $0.01 par value
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3,000,000
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$
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.28
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$
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840,000
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$
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33.01
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Common
Stock, $0.01 par value
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3,000,000
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$
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.28
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$
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840,000
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$
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33.01
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Total
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6,000,000
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$
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.28
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$
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1,680,000
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$
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66.02
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(1) The
shares of our Common Stock being registered hereunder are being registered for
resale by the selling securityholders named in the prospectus.
(2)
Estimated solely for the purpose of computing the amount of the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, based on the closing
price of $.28 on the OTC Bulletin Board on February 8, 2008.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY , 2008
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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6,000,000
SHARES OF
COMMON
STOCK
This prospectus relates to the resale of up to 6,000,000 shares of our
Common Stock, par value $0.01 per share (“Common Stock”) with 1,500,000
shares of our Common Stock issuable each to FiveMore Fund Ltd. and
Mainland Participation Corp and 3,000,000 shares of our common to
QualityStocks, LLC. (the “Selling Securityholders”). Selling
Securityholders may sell their common stock from time to time at
prevailing market prices.
Our
Common Stock is registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended, and is quoted on the over-the-counter market and
prices are reported on the OTC Bulletin Board under the symbol “ARVY.” On
February 8, 2008, the closing price as reported was $.28.
INVESTMENT
IN THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF
RISK. YOU MAY LOSE YOUR ENTIRE INVESTMENT. CONSIDER CAREFULLY THE “RISK
FACTORS” BEGINNING ON PAGE 2 OF THIS PROSPECTUS BEFORE
INVESTING.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
ALLIANCE
RECOVERY CORPORATION IS CONSIDERED TO BE IN UNSOUND FINANCIAL CONDITION.
PERSONS SHOULD NOT INVEST UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT.
The Date of This Prospectus
is
:
February,
2008
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PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all the information that
you should consider before investing in the common stock. You should
carefully read the entire prospectus, including “Risk Factors”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”and the
Consolidated Financial Statements, before making an investment decision
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ABOUT
OUR COMPANY
On
November 6, 2001, we were incorporated in the State of Delaware under the name
American Resource Recovery Group Ltd.
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.
Our
operations are located in Monroe, Michigan. We maintain a website at the
following address: www.alliancerecoverycorporation.com. Through a link on our
website to the SEC website, www.sec.gov, the public is provided free access to
our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 as soon as reasonably practicable after electronic filing with the SEC.
We intend to make the charters of our Board committees, and our Code of Business
Conduct and Ethics for our directors, officers and employees, available on our
website, and we will post on our website any waivers of, or amendments to, such
code of ethics. Our website and the information contained therein or linked
thereto are not incorporated by reference into this report.
We are a
development stage company. We intend to engage in the business of producing
electrical energy from waste and then selling it to industries such as
utilities. While reducing rubber waste into fuel oil for electrical energy
generation, we will also produce the required process fuel and marketable
by-products derived from the thermal process. These by-products include carbon
black, steel, and steam and/or hot water.
We
currently have no business operations. We intend, through future wholly-owned
subsidiaries, to build processing plants in various large urban centers of the
United States. We intend to operate strategically positioned manufacturing
process units (“ARC Units”) in selected states of the United States. ARC Units
are based upon several existing manufacturing processes integrated into a single
production facility. Prior to the waste to energy process, an initial volume
reduction system is designed to compact approximately 3,000 pounds of rubber
waste into 4’ x 4’ x 8’ ecoblocks for convenient and safe storage. The waste to
energy conversion process reduces waste rubber using a thermal process to
produce fuel oil to power large reciprocating engines driving alternators
generating electrical energy for sale to adjacent users or into local power
grids. Scrap tires will be the main rubber waste, which when reduced to oil,
provides the fuel for the production of energy and gases to power the ARC
unit.
We will
receive tipping fees in exchange for providing a point of final disposition for
rubber waste. In addition to process fuel gases generated in the conversion
reaction, the ARC Unit also has the ability to recover other residual
by-products from the rubber to oil thermal conversion process. Carbon black and
steel are recovered in marketable qualities and quantities. Steam and/or hot
water, produced during the thermal conversion process are also marketable
recovered by-products. The ARC Unit was developed by our founder, Peter Vaisler,
a team of third-party consulting engineers and scientists, as well as
individuals with specific business and process and equipment operations
knowledge acquired from hands on operating experience with the various system
components. The ARC Unit is an integration of existing process technology
currently in use as stand alone manufacturing processes. We have identified a
number of potential sites for the construction of our first
installation.
Our
auditors have issued us a going concern opinion. Two of our officers
and directors, David Williams and Peter Vaisler, own the majority of our shares
allowing them to control all of our actions. We believe that we are not a blank
check company as that term is defined in Rule 419 of Regulation C under the
Rules of the Securities Act of 1933. We do not have any intention of merging
with another company or allowing ourselves to be acquired by another company, or
to act as a blank check company as defined in Regulation C.
Where You Can Find
Us
We are
located at #390-1285 N. Telegraph Road, Monroe, Michigan 48162-3368. Our
telephone number is (519) 671-0417 and our fax number is (519)
473-6507.
THE
OFFERING
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COMMON
SHARES OUTSTANDING PRIOR TO OFFERING
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Common
Stock, $0.01 par value
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21,575,425
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Common
Stock Offered by Selling Securityholders
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6,000,000
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Use
of Proceeds
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We
will not receive any proceeds from the sale by the Selling Securityholders
of shares in this offering. See “Item 4. Use of
Proceeds.”
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Risk
Factors
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An
investment in our common stock involves a high degree of risk and could
result in a loss of your entire investment.
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OTC
Symbol
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ARVY.OB
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Executive
Offices
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Currently,
our executive offices are located at 390-1285 N. Telegraph
Road
Monroe,
Michigan 48162-3368, and our telephone number
is (519) 671-1417.
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TRANSACTION
SUMMARY
TRANSACTION
WITH FIVEMORE FUND, LTD. AND MAINLAND PARTICIPATION CORP.
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 intend 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.
The term
of the Agreements commenced on January 15, 2008 and February 1, 2008 and will
continue for a period of three (3) months as follows: Investor
relations, public relations and corporate finance services will begin
immediately upon receipt of IR/ PR costs and fees, and will continue for a
period of three (3) months. Professional maintenance of such services
and continuing communication with the established network will continue
thereafter for an additional three (3) months.
For the
performance of its consulting services and implementation of PR/ IR marketing
program we are obligated to provide each Consultant 1,500,000 restricted shares
of our common stock immediately following execution of each Agreement, which
must be registered in a registration statement with the Securities and Exchange
Commission (“SEC”) deemed effective by the SEC within six (6) months from the
date of each Agreement. Notwithstanding the above, we are obligated
to use our best efforts to have the registration statement declared effective by
the SEC as soon as practicable.
TRANSACTION
WITH QUALITYSTOCKS, LLC
On
December 10, 2007, we entered into a Marketing Agreement (the “Marketing
Agreement”) with QualityStocks, LLC (“QualityStocks”). Pursuant to
the Marketing Agreement, QualityStocks, will, generally, 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 begins December 10, 2007 and ends June 30, 2008. As
compensation for the services set forth above, we will provide QualityStocks
with a total of 3,000,000 shares of common stock. For the purposes of
this Agreement and by mutual consent it is agreed that Stock Certificates
representing one sixth of the 3,000,000 shares will be forwarded by Alliance
Recovery Corporation's escrow agent, Anslow + Jaclin, LLP subsequently in one
(1) month intervals for the six month term of the
Agreement. Accordingly, at no time will QualityStocks hold more than
4.99% of the amount of issued and outstanding shares of the
company. Furthermore, QualityStocks and Alliance Recovery Corporation
agree that at any time during the six month term of the Agreement, rather that
providing stock as compensation Alliance Recovery Corporation is permitted to
make monthly cash payments of $50,000 for the services
described.
SUMMARY
INFORMATION AND RISK FACTORS
The
following summary financial data should be read in conjunction with
“Management’s Discussion and Analysis and Plan of Operation” and the Financial
Statements and Notes thereto, included elsewhere in this prospectus. The
statement of operations and balance sheet data from December 31, 2006 and
December 31, 2005 are derived from our December 31, 2006 audited financial
statements. The statement of operations and balance sheet data for the nine
months ended September 30, 2007 were derived from our unaudited financial
statements for the period ended September 30, 2007.
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Nine
Months ended September 30, 2007
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Year
ended December 31, 2006
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Year
ended December 31, 2005
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(Unaudited)
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(audited)
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(audited)
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STATEMENT
OF OPERATIONS
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As
of
September
30, 2007
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As
of
December
31, 2006
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(Unaudited)
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(audited)
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BALANCE
SHEET DATA
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WHERE
YOU CAN FIND US
Our
address is 390-1285 North Telegraph Road, Monroe, Michigan. Our telephone number
is (519)
671-0417.
RISK
FACTORS
The
following risk factors should be considered carefully in addition to the other
information contained in this report. This report contains forward-looking
statements. Forward-looking statements relate to future events or our future
financial performance. We generally identify forward-looking statements by
terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,”
“could,” “intends,” “target,” “projects,” “contemplates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of these
terms or other similar words. These statements are only predictions. The outcome
of the events described in these forward-looking statements is subject to known
and unknown risks, uncertainties and other factors that may cause our customers’
or our industry’s actual results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements, to
differ. “Risk Factors,” “Management’s Discussion and Analysis” and “Business,”
as well as other sections in this report, discuss some of the factors that could
contribute to these differences.
The
forward-looking statements made in this report relate only to events as of the
date on which the statements are made. We undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of unanticipated
events.
This
report also contains market data related to our business and industry. These
market data include projections that are based on a number of assumptions. If
these assumptions turn out to be incorrect, actual results may differ from the
projections based on these assumptions. As a result, our markets may not grow at
the rates projected by these data, or at all. The failure of these markets to
grow at these projected rates may have a material adverse effect on our
business, results of operations, financial condition and the market price of our
Common Stock.
An
investment in our common stock is highly speculative and involves a high degree
of risk. Therefore, you should consider all of the risk factors discussed below,
as well as the other information contained in this document. You should not
invest in our common stock unless you can afford to lose your entire investment
and you are not dependent on the funds you are investing.
OUR
INDEPENDENT AUDITOR HAS ISSUED A GOING CONCERN OPINION WHICH RAISES DOUBTS ABOUT
OUR ABILITY TO CONTINUE AS A VIABLE ENTITY
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
$1,966,290, a working capital deficiency of $702,181 and cash used in operations
from inception of $1,764,762 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.
We have a
history of operating losses, limited funds and may continue to incur operating
losses. If these continue, we may ultimately be required to seek protection from
creditors under applicable bankruptcy laws.
WE
CAN LOSE THE RIGHT TO USE THE TECHNOLOGY THAT IS A VITAL PART OF OUR BUSINESS
PLAN SINCE WE ONLY HAVE THE RIGHT TO USE THIS TECHNOLOGY PURSUANT TO OUR
EMPLOYMENT AGREEMENT WITH PETER VAISLER, OUR CEO, PRESIDENT AND
DIRECTOR
There is
certain technology that we need to use to be able to carry out our business
plan. This technology is owned by Peter Vaisler, our CEO, President and
director. He licenses the technology to us pursuant to the employment agreement
we have with him. If Mr. Vaisler’s employment agreement is terminated, we
may lose the right to use the technology. This will prevent us from carrying out
our business plan. However, if the employment agreement is terminated, we have
the right to license the technology for a onetime fee equal to the current
replacement value of the technology determined by an engineer’s opinion
acceptable to us and Mr. Vaisler.
EXISTING
STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF OUR COMMON
STOCK PURSUANT TO THE INVESTOR RELATIONS/PUBLIC RELATIONS AGREEMENTS AND
MARKETING AGREEMENT.
The sale
of our common stock to FiveMore Fund, Ltd., Mainland Participation Corp. and
QualityStocks, LLC in accordance with the Investor Relations/Public Relations
Agreements may have a dilutive impact on our shareholders. As a result, our
net income per share could decrease in future periods and the market price of
our common stock could decline
The
perceived risk of dilution may cause our stockholders to sell their shares,
which would contribute to a decline in the price of our common stock. Moreover,
the perceived risk of dilution and the resulting downward pressure on our stock
price could encourage investors to engage in short sales of our common stock. By
increasing the number of shares offered for sale, material amounts of short
selling could further contribute to progressive price declines in our common
stock.
WE
ARE REGISTERING 6,000,000 SHARES. THE SALE OF SUCH SHARES COULD DEPRESS
THE MARKET PRICE OF OUR COMMON STOCK.
We are
registering 6,000,000 shares of common stock under the registration statement of
which this prospectus forms a part for issuance pursuant to the Investor
Relations/Public Relations Agreements and the Marketing Agreement. The
sale of these shares into the public market by the selling stockholders could
depress the market price of our common stock. As of February 6, 2008,
there were 21,575,425 shares of our common stock issued and
outstanding.
OUR
STOCK IS THINLY TRADED, AS A RESULT YOU MAY BE UNABLE TO SELL AT OR NEAR ASK
PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR SHARES.
The
shares of our common stock are thinly-traded on the OTC Bulletin Board, meaning
that the number of persons interested in purchasing our common shares at or near
ask prices at any given time may be relatively small or non-existent. This
situation is attributable to a number of factors, including the fact that we are
a small company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven, early stage company such as ours or purchase or recommend the purchase
of our shares until such time as we became more seasoned and viable. As a
consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. We cannot give you
any assurance that a broader or more active public trading market for our common
shares will develop or be sustained, or that current trading levels will be
sustained. Due to these conditions, we can give investors no assurance that they
will be able to sell their shares at or near ask prices or at all if you need
money or otherwise desire to liquidate their shares.
WE
HAVE A LIMITED OPERATING HISTORY, HAVE NO OPERATIONS OR REVENUES TO DATE AND
BASED ON THIS THERE IS NO ASSURANCE THAT WE WILL BECOME A SUCCESSFUL
BUSINESS.
We are a
development stage company with no operations or revenues to date. We intend to
utilize both design/build and turn-key equipment contracts, operation and
maintenance contactors to operate various components of our first installation
and will assemble a management and operations team familiar with the plant’s
process system. However, our likelihood of success must be considered in light
of all of the risks, expenses and delays inherent in establishing a new
business, including, but not limited to, unforeseen expenses, complications and
delays, established competitors and other factors. The services of seasoned
contracted operators and experienced key management professionals, is no
assurance that we will ever achieve profitable operations.
Since we
presently do not have any business operations, we will not need financing until
we raise $20M and commence operations of our facility. In the interim, our
present shareholders and management have indicated a willingness to provide
short term financing.
WE
ARE DEPENDENT ON KEY EMPLOYEES, ENGINEERS, CONSULTANTS AND CONTRACTORS AND THE
LOSE OF ANY OF THEM OR THEIR INABILITY TO COMPLETE THE PROJECT CAN LEAD TO OUR
DEMISE
Our
success is materially dependent upon the expertise and experience of our
executives and certain consultants. A corporate team of highly qualified project
managers, engineers, and experienced executives, familiar with the successful
commercialization of leading edge technologies, has been responsible for our
efforts to date. Key management positions have been identified and we continue
to have discussions with qualified candidates until such time as the entire
project capitalization has been completed. These individuals may leave their
current employment upon completion of our capitalization and may join us as
executives. However, there is no guarantee that the project capitalization will
be completed and similarly, if completed there is no guarantee that we will be
able to attract the appropriate management team in a timely manner.
The
process system technology was designed and is being enhanced by our founder and
certain engineering consultants. This group includes Peter Vaisler, our
President and CEO; and Resource International Ltd., a Virginia-based engineering
firm that will be responsible for our overall project management, equipment
installation, site engineering, permit approvals, construction surveillance,
system design, sourcing and fabrication, mechanical and structural installation,
and operator training.
The
overall project will be managed by Resource International Ltd. However,
qualified and specialized sub-contractors will be utilized by Resource
International Ltd. for specific tasks. As an example, Resource International
Ltd. will utilize the services of a sub-contractor for heat recovery design, and
boiler systems fabrication selection and steam/hot water energy systems. The
ultimate engineering group has many years of experience in process engineering
and controls, energy production and waste to energy, manufacturing, and thermal
manufacturing and disposal technology, but could be unsuccessful in completing
the first installation. There is no assurance that their combined expertise
which includes waste disposal, waste handling, incineration, thermal reduction,
electrical generation and carbon black manufacturing will allow the project to
be completed.
Our
success is also materially dependent upon the experience and expertise of Peter
Vaisler, our President, CEO and a Director, and his ability to attract
executives upon completion of our overall capital financing. There is no
guarantee that this financing will occur. We have entered into a five-year
employment agreement with Mr. Vaisler, which includes non-compete
provisions and requires his full time, attention and devotion toward our
business objectives. The loss of the services of any of our key personnel or
consultants would likely have a material adverse effect on our business. For a
one-time fee, we have the option to enter into a license agreement with
Mr. Vaisler for the continued use of the technology if and when he ceases
to be employed by us.
IF
WE ARE UNABLE TO PROCURE NEEDED PERMITS, THE PROJECT WILL NOT BE COMPLETED AND
WE WILL, MOST LIKELY, CEASE OPERATIONS.
Resource
International Ltd. has worked with our founder, Peter Vaisler in order to
develop our technology. Resource International Ltd. will work with us to secure
any permits required in connection with the construction and operation of our
facilities. We believe that any emissions produced by our facilities will be
within EPA standards and therefore do not anticipate difficulty in obtaining
state or local permits and are not aware of any federal environmental permitting
requirements. However, there is no assurance that we will be able to meet all
permitting requirements in our target markets in the United States or in foreign
jurisdictions. In addition, existing EPA guidelines and other environmental
regulations could be revised, making it difficult or impossible for us to meet
the any such new requirements. If we are unable to acquire all necessary
permits, we would be unable to start our business and would be forced to seek
permits elsewhere which could critically delay or cancel the overall project.
This could cause us to cease our operations.
UNIQUE
RISKS OF OUR BUSINESS
IF
WE DO NOT PROCESS WASTE, OUR REVENUES WILL NOT BE SIGNIFICANT AND NEGATIVELY
IMPACT OUR OPERATIONS AND FUTURE EXPANSION
There may
not be a sufficient volume of waste rubber generated in vicinity of our first
showcase facility, at a site to be determined to make our operations cost
efficient. Furthermore, we may not be able to encourage tire jockeys, truckers
and waste operators servicing these areas to utilize our first facility an
facility as an alternative to trucking the waste to disposal sites positioned
away from urban cities or to out of state disposal sites. Our targeted
marketing/education program may not be successful in getting those operators in
the disposal chain to be “environmentally responsible” by utilizing an urban or
regionally based point of final disposition instead of trucking the waste to
another jurisdiction, possibly even out of state. Also, tire and rubber goods
manufacturers may develop products that will not wear out or have an extended
life thereby reducing the volume of rubber waste generated annually requiring
disposal. If any of the above occurs, we will not have sufficient revenues. This
will have a negative impact on our business and can deter our future
expansion.
POSSIBLE
CHANGES IN ENVIRONMENTAL REGULATIONS CAN MAKE IT DIFFICULT AND COSTLY TO COMPLY
WITH AND CAUSE US TO CHANGE OUR BUSINESS PLAN AND RESULT IN A REDUCTION OF
REVENUES
Unforeseen
changes in environmental regulations could make it difficult, or even impossible
for management and their engineering team to amend existing environmental
permits or to reapply for new permits. Changes in Federal or State laws could
make it difficult or impossible to comply with emission, storage, operation and
transportation regulations. This can result in a change to our business plan if
we can not obtain certain amendments to permits or such changes cause us to
expend more resources than expected. In addition, this will most likely lead to
a reduction in revenues.
In
addition, changes in government policies affecting storage, handling and
processing of scrap tires, rubber waste and air quality standards could have a
material adverse effect on us.
A
CHANGE IN MARKET OR ECONOMIC CONDITIONS CAN RESULT IN LOSING THE MARKET FOR
ELECTRICAL ENERGY THAT WE INTEND TO PRODUCE RESULTING IN A CESSATION OF OUR
BUSINESS
There may
not be a market for the electrical energy generated as a result of a change in
market or economic conditions, and implementation of a new form of energy
production technology and/or materials. Also, there may not be a market for the
by-products we intend to produce, including carbon black, steel and steam and/or
hot water.
Poor
economic conditions and/or high fuel costs could cause disruptions in
transportation and/or labor disputes in a declining or inflationary economy and
could make it impossible to obtain waste rubber for conversion to fuel oil.
However, an inflationary economy could actually benefit us as increased energy
prices would increase revenues from both electricity and carbon black sales. The
facility may never be able to acquire a sufficient inventory as a result of any
or a combination of the aforementioned and result in the cessation of our
business.
SEVERAL
FACTORS COULD RESULT IN OUR FACILITY NOT OPERATING PROPERLY AND LEAD TO OUR
DEMISE
Although
management believes that similar process furnaces are operating at numerous
locations around the world, the oil conversion furnace and all ancillary
equipment normally associated with thermal reactions may not function properly
and neither the fabricator/suppliers nor management or their engineering team
may be able to correct the deficiency. Employees could sabotage the processing
equipment causing a business interruption causing the facility to not make
sufficient product or energy to meet its financial projection. We expect to
enter into a contractual arrangement with a third-party operator for the
production and sale of the electrical energy to be produced. The contract may
never be completed. All of the above factors could result in our
demise.
WE
MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP A MARKET FOR OUR PRODUCTS WHICH WILL
CAUSE US TO FAIL TO MEET PROJECTED REVENUES
We intend
to sell electricity to local utilities. The contracted electrical utility
company responsible for electrical energy generation and sales may not be able
to develop sufficient market share for electrical energy. Similarly, management
and our consultants may not successfully develop a market for carbon black,
scrap steel or other residual products we could generate, and as a result may
not achieve projected revenues. The failure to reach certain financial
performance levels could negatively impact our financial viability and could
make it difficult for us to expand operations into additional U.S. urban
cities.
IF
WE DO NOT ATTRACT CERTAIN MARKETING, OPERATIONS AND ENGINEERING STAFF, WE WILL
HAVE DIFFICULTY IN MANAGING OUR FIRST FACILITY. THIS CAN RESULT IN A DELAY OF
STARTING UP THE FACILITY AND/OR A REDUCTION OF REVENUES BASED ON LOWER OUTPUT
RATES
Although
key operations positions are contracted out, we may not be able to attract
marketing, operations, and engineering staff with sufficient acumen and
abilities to successfully manage our first facility. Training deficiencies could
cause the facility to operate at lower output rates, which would negatively
impact our financial performance. Similarly, the start-up period of the facility
could be extended as a result of fabricators and/or contractors correcting
technical deficiencies. Although delivery and performance guarantees will be
provided by fabricators and/or contractors, a business failure by any of these
entities could delay the start-up of the installation, while financial and other
guarantees, notices and cure periods are implemented with respect to completing
the installation and start-up of the facility.
THE
FAILURE OF REGULATORY APPROVAL BY GOVERNMENT AGENCIES FOR OUR FUTURE SITES WILL
RESULT IN A DELAY ON REALIZING A RETURN ON OUR INVESTMENT
The
selection of future sites and the development and operation of our installations
are subject to regulatory approval by governmental agencies. While the fact that
our engineering consultants at Resource International have pre-qualified 12
sites from an environmental approval perspective, each site may be subject to
local and state regulations concerning storage, processing and handling of
rubber waste including scrap tires and air quality standards. Additionally,
there can be no assurance that we will be able to locate and lease or purchase a
sufficient number of suitable sites within the expansion area or that
difficulties will not be encountered by us or third parties in their efforts to
secure necessary approvals which could delay us from realizing a return on our
investment.
WE
WILL NEED TO RAISE FUNDS TO DEVELOP ADDITIONAL INSTALLATION OF FACILITIES AND
THERE IS NO ASSURANCE WE WILL RAISE SUCH FUNDS
We will
also be dependent on our ability to raise funds to develop additional
installation through private placements or other sources. We have no plans, at
this time, to secure solid waste disposal bond funds. There can be no assurance
that in the case of solid waste disposal bond funds that provide tax incentives
to promote the availability of solid waste disposal bonds will continue. The
ability to raise additional funds will be determined by the operational success
of the first installation to be built upon a yet to be determined site. Thus,
there can be no assurance that we will be successful in obtaining
financing.
OTHER
ENERGY COMPANIES AND DISPOSAL COMPANIES WITH MORE EXPERIENCE MAY COMPETE WITH US
CAUSING A DECREASE IN THE MARKET SHARE
While we
believe we have no direct competitors, a number of other firms are engaged in
the production of energy, carbon black and the like. Also, other firms are
engaged in the business of disposal and processing of scrap tires.
Our
likely competitors are: JM Beer Corp., Conrad Industries, and Unisphere
Corporation. If such companies compete with us, this can result in a reduction
of our market share.
OUR
PRINCIPAL OFFICER AND A DIRECTOR HAVE CONTROL OF US
Peter
Vaisler, our President, CEO and Director, and David Williams and Walter Martin,
our directors, in the aggregate own approximately 54% of our issued and
outstanding common stock. Therefore, they control us and can control the
election of our directors and officers.
BROKER-DEALER
REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY
Section
15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2
promulgated thereunder by the SEC require broker-dealers dealing in penny stocks
to provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the document
before effecting any transaction in a penny stock for the investor s account.
Potential investors in our common stock are urged to obtain and read such
disclosure carefully before purchasing any shares that are deemed to be penny
stocks. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve
the account of any investor for transactions in such stocks before selling any
penny stock to that investor. This procedure requires the broker-dealer to
(i) obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny stocks are
suitable for the investor and that the investor has sufficient knowledge and
experience as to be reasonably capable of evaluating the risks of penny stock
transactions; (iii) provide the investor with a written statement setting
forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement
from the investor, confirming that it accurately reflects the investor s
financial situation, investment experience and investment objectives. Compliance
with these requirements may make it more difficult for holders of our common
stock to resell their shares to third parties or to otherwise dispose of them in
the market or otherwise.
“PENNY
STOCK” RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT
Trading
in our securities is subject to the “penny stock” rules. The SEC has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
These rules require that any broker-dealer who recommends our securities to
persons other than prior customers and accredited investors, must, prior to the
sale, make a special written suitability determination for the purchaser and
receive the purchaser’s written agreement to execute the transaction. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated with trading in the penny stock
market. In addition, broker-dealers must disclose commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities they offer.
The
additional burdens imposed upon broker- dealers by such requirements may
discourage broker-dealers from effecting transactions in our securities, which
could severely limit the market price and liquidity of our securities. Broker-
dealers who sell penny stocks to certain types of investors are required to
comply with the Commission’s regulations concerning the transfer of penny
stocks. These regulations require broker- dealers to:
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a suitability determination prior to selling a penny stock to the
purchaser;
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the purchaser’s written consent to the transaction; and
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certain written disclosures to the
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FORWARD
LOOKING STATEMENTS
Information included
or incorporated by reference in this prospectus may
contain forward-looking statements. This information may
involve known and
unknown risks, uncertainties and
other factors which may cause
our actual results, performance or achievements to be
materially different from the future results, performance or achievements
expressed or implied by any forward-looking
statements. Forward-looking statements, which involve
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words "may,"
"should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these
words or other variations on these words or comparable
terminology.
This
prospectus contains forward-looking statements, including statements regarding,
among other things, (a) our projected sales and profitability, (b) our
technology, (c) our manufacturing, (d) the regulation to which we are subject,
(e) anticipated trends in our industry and (f) our needs for working capital.
These statements may be found under “Management’s Discussion and Analysis or
Plan of Operations” and “Business,” as well as in this prospectus
generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under “Risk Factors” and
matters described in this prospectus generally. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this prospectus will in fact occur.
Except as
otherwise required by applicable laws, we undertake no obligation to publicly
update or revise any forward-looking statements or the risk factors described in
the prospectus, whether as a result of new information, future events, changed
circumstances or any other reason after the date of this
prospectus.
USE
OF PROCEEDS
The
selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares. We have agreed to bear the expenses relating to the
registration of the shares for the selling security holders.
DIVIDEND
POLICY
We have
never declared dividends or paid cash dividends on our common stock and our
board of directors does not intend to distribute dividends in the near future.
The declaration, payment and amount of any future dividends will be made at the
discretion of the board of directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and
capital requirements, and other factors as the board of directors considers
relevant. There is no assurance that future dividends will be paid, and, if
dividends are paid, there is no assurance with respect to the amount of any such
dividend.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There was
no established public trading market for our Common Stock during the years
ending December 31, 2006 and 2005. Our Common Stock began trading on the Over
the Counter Bulletin Board (“OTC Bulletin Board”), ticker symbol ARVY, on
February 14, 2007. The closing price of the common stock on February 6,
2008 was $.28 per share.
The
market price of our common stock is subject to significant fluctuations in
response to variations in our quarterly operating results, general trends in the
market, and other factors, over many of which we have little or no control. In
addition, broad market fluctuations, as well as general economic, business and
political conditions, may adversely affect the market for our common stock,
regardless of our actual or projected performance.
Holders
of Our Common Stock
As of the
date of this registration statement, we have approximately 102 shareholders of
record.
MANAGEMENT’S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
Forward
Looking Statements
This
registration statement of Form S-1 contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and Federal
securities laws, and is subject to the safe-harbor created by such Act and laws.
Forward-looking statements may include our statements regarding our goals,
beliefs, strategies, objectives, plans, including product and service
developments, current dependence on our contract with Well to Wire Energy, Inc.,
future financial conditions, results or projections or current expectations. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms, or other
comparable terminology. These statements are subject to known and unknown risks,
uncertainties, assumptions and other factors that may cause actual results to be
materially different from those contemplated by the forward-looking statements.
The business and operations of Alliance Recovery Corporation are subject to
substantial risks, which increase the uncertainty inherent in the
forward-looking statements contained in this report. Except as required by law,
we undertake no obligation to release publicly the result of any revision to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Further information on potential factors that could affect
our business is described in our various periodic reports filed with the SEC.
Readers are also urged to carefully review and consider the various disclosures
we have made in this and such previously filed reports.
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 September 30, 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.
However,
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 333,334 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 333,334 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 333,334 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, will, generally, 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 begins December 10, 2007 and ends June 30,
2008. As compensation for the services set forth above, we will
provide QualityStocks with a total of 3,000,000 shares of common
stock. For the purposes of this Agreement and by mutual consent it is
agreed that Stock Certificates representing one sixth of the 3,000,000 shares
will be forwarded by Alliance Recovery Corporation's escrow agent, Anslow +
Jaclin, LLP subsequently in one (1) month intervals for the six month term of
the Agreement. Accordingly, at no time will QualityStocks hold more
than 4.99% of the amount of issued and outstanding shares of the
company. Furthermore, QualityStocks and Alliance Recovery Corporation
agree that at any time during the six month term of the Agreement, rather that
providing stock as compensation Alliance Recovery Corporation is permitted to
make monthly cash payments of $50,000 for the services
described.
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 intend 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.
The term
of the Agreements commenced on January 15, 2008 and February 1, 2008 and will
continue for a period of three (3) months as follows: Investor
relations, public relations and corporate finance services will begin
immediately upon receipt of IR/ PR costs and fees, and will continue for a
period of three (3) months. Professional maintenance of such services
and continuing communication with the established network will continue
thereafter for an additional three (3) months.
For the
performance of its consulting services and implementation of PR/ IR marketing
program we are obligated to provide each Consultant 1,500,000 restricted shares
of our common stock immediately following execution of each Agreement, which
must be registered in a registration statement with the Securities and Exchange
Commission (“SEC”) deemed effective by the SEC within six (6) months from the
date of each Agreement. Notwithstanding the above, we are obligated
to use our best efforts to have the registration statement declared effective by
the SEC as soon as practicable.
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
$1,966,290 and cash used in operations from inception through September 30, 2007
of $1,764,762. As of September 30, 2007, we had a working capital deficiency of
$702,181.
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 developed 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 and 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
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2)
Site Lease Matters & Development Fees
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3)
Site Engineering, Regulatory & Compliance
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6)
Rubber to Oil Thermal Conversion Process Equipment
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7)
Warehouse & Conveyance Equipment
Leases/Purchases
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9)
Administrative Construction Expenses
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10)Legal,
Accounting, Travel & Misc. Fees & Expenses
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11)Media,
Promotion & Government Relations
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13)Salaries,
Wages & Fees
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15)Turn-key
Energy System & Installation
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17)Financing
Legal & Accounting
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18)Administrative
Contingency
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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 through the entire system will be ready to
deliver hot water and/or steam to a greenhouse operator. 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.
The ARC
installation is designed to operate continuously. As a result, the installation
has the ability to produce heat constantly to service the hot water requirements
of a hydroponics operator 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 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 is a common sense
alternative to exhausting heat into the atmosphere. It is the belief of
management, our consulting engineers and the several of the hydroponics
operators that have discussed our ability to generate heat, that a15 to 20 acre
hydroponics greenhouse could be heated from the heat recovered from the thermal
process heat recovery boiler in combination with the heat available from
standard heat recovery mechanisms that are part of the reciprocating engines
driving the alternators making electricity.
The type
of relationship 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 will transfer the heat from the ARC steam and/or hot water to the hot
water in the hydroponics operator’s underground reservoir.
The ARC
cooled condensate and/or water will be returned to the ARC via the
aforementioned pipeline heated again and once again returned to the greenhouse
in a closed loop system.
Several
methods of compensation for ARC heat sources have been discussed. These include
a percentage of the hydroponics greenhouse gross or not sales and discounted
avoided cost which is the operators cost of natural gas or fuel oil less a
negotiated discount. We will not be positioned to enter into specific
negotiations until such time as the $20,000,000 financing has been
completed.
Going Concern
Consideration
As
reflected in the accompanying September 30, 2007 financial statements we are in
the development stage with no operations, a stockholders’ deficiency of
$1,966,290, a working capital deficiency of $702,181 and used cash in operations
from inception of $1,764,762. 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 September 30, 2007 reflects assets of $18,530 consisting of
cash of $15,460 and property and equipment of $3,070 and total current
liabilities of $717,641 consisting of accounts payable and accrued interest of
$62,960, an amount of $429,718 due to a related party, a note payable of $24,963
with a net discount of $37, and a note payable due to a related party of
$200,000.
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.
Our
audited balance sheet as of December 31, 2006 reflects assets of $36,782
consisting of cash of $32,037 and property and equipment of $4,745 and total
liabilities of $594,954 consisting of accounts payable and accrued expenses of
$59,262, an amount of $361,851 due to a related party, a note payable of
$150,000, and a note payable due to a related party of $23,841.
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.
Going Concern Consideration
for the year ended December 31, 2006
As
reflected in the accompanying financial statements for the period ended December
31, 2006, we are in the development stage with no operations, a stockholders’
deficiency of $1,642,995, a working capital deficiency of $562,917 and used cash
in operations from inception of $1,508,384. 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.
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.
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: a manufacturing 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.
DESCRIPTION
OF PROPERTY
We do not
own or lease any property. Our Chief Executive Officer, Mr. Vaisler uses various
offices including his home office, directors’ offices, and the offices of legal
counsel at no cost to us.
There are
no limitations pertaining to the use of Mr. Vaisler’s home office. 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.
MANAGEMENT
The
directors and executive officers of the Company are:
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Peter
Vaisler
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Director,
President, Chief Executive Officer; as of November 2001
Principal
Financial Officer, Principal Accounting Officer; as of February
2005
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David
Williams
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Director;
as of January 2004
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Walter
Martin
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Director;
as of January 2004
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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. Mr. Williams has served as President of his Investment
Company, Roxborough Holdings Limited, in Toronto, since 1995. From
1969 to 1994, he held senior management positions with Beutel Goodman Company,
one of Canada's largest institutional money managers. He also has
extensive Board experience, serving as Chairman and Director of Roador
Industries Inc. He is a Director of Calvalley Petroleum Inc.,
Atlantis Systems International, SQI Diagnostics Inc., Rockies
Financial Corporation, Resin Systems Inc., and Western Copper Holdings. Mr.
Williams holds a Bachelors degree in Business from Bishop's University,
Lennoxville, Quebec, and an MBA from Queen's University, Kingston, Ontario. Mr.
Williams is a Director of Bishop's University Foundation, and is involved with a
number of community related projects.
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.
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).
EXECUTIVE
COMPENSATION
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, 2006, 2005 and 2004:
SUMMARY
COMPENSATION TABLE
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Annual
Compensation
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Name/Title
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Year
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Salary
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Bonus
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Other
Annual
Compensation
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Restricted
Option
Stocks/Payouts Awarded
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Peter
Vaisler
Director,
CEO
|
2007
|
$250,000
*
|
0
|
0
|
0
|
|
2006
|
$250,000
*
|
0
|
10,236
|
0
|
|
2005
|
$250,000
*
|
0
|
0
|
0
|
*
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 represents a car allowance
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.
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, Walter Martin, loaned us $100,000. The
loan is interest free for the first nine months and six percent interest for the
last three months. The unsecured loan was recently amended and is due
June 28, 2008. Mr. Martin also 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.
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 e
qual
to the closing bid price of the Common Stock
on the OTC Bulletin Board on
th
e day prior to receipt by the
Company of the Conversion Notice
..
DESCRIPTION
OF SECURITIES
General
Our
authorized capital stock consists of 100,000,000 shares of common stock at a par
value of $0.01 per share and no shares of preferred stock.
Common
Stock
As
of February 6, 2008 21,575,425 shares of common stock are issued and
outstanding and held by approximately 102 shareholders. Holders of our common
stock are entitled to one vote for each share on all matters submitted to a
stockholder vote.
Holders
of common stock are entitled to one vote for each share of common stock owned of
record on all matters to be voted on by stockholders, including the election of
directors. The holders of common stock are entitled to receive such dividends,
if any, as may be declared from time to time by the Board of Directors, in its
discretion, from funds legally available. The common stock has no preemptive or
other subscription rights, and there are no conversion rights or redemption
provisions. All outstanding shares of common stock are validly issued, fully
paid and non-assessable.
Preferred
Stock
As
of February 6, 2008, we have no preferred stock authorized.
Dividends
We have
never declared or paid any cash dividends on shares of our capital stock. We
currently intend to retain earnings, if any, to fund the development and growth
of our business and do not anticipate paying cash dividends in the foreseeable
future.
Our
payment of any future dividends will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results, cash needs and growth plans.
Warrants
As
of February 6, 2008, we have 1,948,647 warrants
outstanding. Each warrant entitles the warrant holder to one share of
our common stock. The exercise price for the warrants is $1.00 per share. We
will receive proceeds from the exercise of the warrants.
Options
As
of February 6, 2008, we have not granted any stock options.
SELLING
SECURITY HOLDERS
We agreed
to register for resale shares of common stock by the selling securityholders
listed below. The selling securityholders may from time to time offer and sell
any or all of their shares that are registered under this prospectus. The
selling securityholders, and any participating broker-dealers are “underwriters”
within the meaning of the Securities Act of 1933, as amended. All expenses
incurred with respect to the registration of the common stock will be borne by
us, but we will not be obligated to pay any underwriting fees, discounts,
commissions or other expenses incurred by the selling securityholders in
connection with the sales of such shares.
The
following table sets forth information with respect to the maximum number of
shares of common stock beneficially owned by each of the selling securityholders
named below and as adjusted to give effect to the sales of the shares offered
hereby. The shares beneficially owned have been determined in accordance with
rules promulgated by the SEC, and the information is not necessarily indicative
of beneficial ownership for any other purpose. The information in the table
below is current as of the date of this prospectus. All information contained in
the table below is based upon information provided to us by the selling
securityholders and we have not independently verified this information. The
selling securityholders are not making any representation that any shares
covered by the prospectus will be offered for sale. The selling securityholders
may from time to time offer and sell pursuant to this prospectus any or all of
the common stock being registered.
Except as
indicated below, the selling securityholders have never held any position or
office with us, nor are any of the selling securityholders associates or
affiliates of any of our officers or directors. Except as indicated below, no
selling stockholder is the beneficial owner of any additional shares of common
stock or other equity securities issued by us or any securities convertible
into, or exercisable or exchangeable for, our equity securities. No selling
stockholder is a registered broker-dealer or an affiliate of a
broker-dealer.
For
purposes of this table, beneficial ownership is determined in accordance with
SEC rules, and includes voting power and investment power with respect to shares
and shares owned pursuant to warrants exercisable within 60 days. The "Number of
Shares Beneficially Owned After the Offering” column assumes the sale of all
shares offered.
As
explained below under “Plan of Distribution,” we have agreed with the selling
securityholders to bear certain expenses (other than broker discounts and
commissions, if any) in connection with the registration statement, which
includes this prospectus.
|
|
|
Number
of Shares Beneficially
Owned
Prior to Offering(1)
|
|
|
|
Number
of Shares Beneficially Owned After the Offering
|
|
|
FiveMore
Fund, Ltd.
|
|
|
1,500,000
|
|
|
1,500,000
|
(2)
|
|
0
|
|
|
Mainland
Participation Corp.
|
|
|
1,500,000
|
|
|
1,500,000
|
(3)
|
|
0
|
|
|
QualityStocks,
LLC
|
|
|
3,000,000
|
|
|
3,000,000
|
(4)
|
|
0
|
|
|
Total
|
|
|
6,000,000
|
|
|
6,000,000
|
|
|
0
|
|
|
(1)
|
The
actual number of shares of common stock offered in this
prospectus.
|
|
(2)
|
On
January 15, 2007 we entered into an Investor Relations/Public Relations
Agreement with FiveMore Fund, Ltd. Pursuant to the
Agreement, we are registering 1,500,000 shares of our common stock for
resale by FiveMore Fund, Ltd. FiveMoreFund, Ltd. is
controlled by Mr. Johannes Mino Roth.
|
|
(3)
|
On
February 1, 2008 we entered into an Investor Relations/Public Relations
Agreement with Mainland Participation Corp. Pursuant to the
Agreement, we are registering 1,500,000 shares of our common stock for
resale by Mainland Participation Corp. Mainland Participation
Corp. is controlled by Dr. Karlhein Hammerle.
|
|
(4)
|
On
December 10, 2007 we entered into a Marketing Agreement with
QualityStocks, LLC. Pursuant to the Agreement we are
registering 3,000,000 shares of our common stock for resale by
QualityStocks, LLC. QualityStocks, LLC is controlled by Michael
McCarthy.
|
TRANSACTION
WITH FIVEMORE FUND, LTD. AND MAINLAND PARTICIPATION CORP.
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 intend 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.
TRANSACTION
WITH QUALITYSTOCKS, LLC
On
December 10, 2007, we entered into a Marketing Agreement (the “Marketing
Agreement”) with QualityStocks, LLC (“QualityStocks”). Pursuant to
the Marketing Agreement, QualityStocks, will, generally, 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 begins December 10, 2007 and ends June 30,
2008. As compensation for the services set forth above, we will
provide QualityStocks with a total of 3,000,000 shares of common
stock. For the purposes of this Agreement and by mutual consent it is
agreed that Stock Certificates representing one sixth of the 3,000,000 shares
will be forwarded by Alliance Recovery Corporation's escrow agent, Anslow +
Jaclin, LLP subsequently in one (1) month intervals for the six month term of
the Agreement. Accordingly, at no time will QualityStocks hold more
than 4.99% of the amount of issued and outstanding shares of the
company. Furthermore, QualityStocks and Alliance Recovery Corporation
agree that at any time during the six month term of the Agreement, rather that
providing stock as compensation Alliance Recovery Corporation is permitted to
make monthly cash payments of $50,000 for the services described.
The term
of the Agreements commenced on January 15, 2008 and February 1, 2008 and will
continue for a period of three (3) months as follows: Investor
relations, public relations and corporate finance services will begin
immediately upon receipt of IR/ PR costs and fees, and will continue for a
period of three (3) months. Professional maintenance of such services
and continuing communication with the established network will continue
thereafter for an additional three (3) months.
For the
performance of its consulting services and implementation of PR/ IR marketing
program we are obligated to provide each Consultant 1,500,000 restricted shares
of our common stock immediately following execution of each Agreement, which
must be registered in a registration statement with the Securities and Exchange
Commission (“SEC”) deemed effective by the SEC within six (6) months from the
date of each Agreement. Notwithstanding the above, we are obligated
to use our best efforts to have the registration statement declared effective by
the SEC as soon as practicable.
PLAN
OF DISTRIBUTION
The
selling securityholders and any of their respective pledges, donees, assignees
and other successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling securityholder may use any one or more
of the following methods when selling shares:
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
·
|
privately
negotiated transactions;
|
|
|
·
|
broker-dealers
may agree with the selling securityholder to sell a specified number of
such shares at a stipulated price per share;
|
|
|
·
|
through
the writing of options on the shares;
|
|
|
·
|
a
combination of any such methods of sale; and
|
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling securityholders or any of their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling
securityholder and/or the purchasers of shares for whom such broker-dealers may
act as agents or to whom they sell as principal or both, which compensation as
to a particular broker-dealer might be in excess of customary commissions.
Market makers and block purchasers purchasing the shares will do so for their
own account and at their own risk.
It is
possible that a selling stockholder will attempt to sell shares of common stock
in block transactions to market makers or other purchasers at a price per share
which may be below the then market price. The selling securityholders cannot
assure that all or any of the shares offered in this prospectus will be issued
to, or sold by, the selling securityholders. The selling securityholders and any
brokers, dealers or agents, upon effecting the sale of any of the shares offered
in this prospectus, are "underwriters" as that term is defined under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, or the rules and regulations under such acts. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Discounts,
concessions, commissions and similar selling expenses, if any, attributable to
the sale of shares will be borne by a selling stockholder. The selling
securityholder may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act of 1933.
The
selling securityholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgee or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or any other applicable provision of the Securities Act of 1933
amending the list of selling securityholders to include the pledgee, transferee
or other successors in interest as selling securityholders under this
prospectus.
The
selling securityholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling securityholders to include the pledgee, transferee or other successors
in interest as selling securityholders under this prospectus.
We are
required to pay all fees and expenses incident to the registration of the shares
of common stock. We have agreed to indemnify the selling securityholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act of 1933.
The
selling securityholders acquired the securities offered hereby in the ordinary
course of business and have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder.
If we are
notified by any selling stockholder that any material arrangement has been
entered into with a broker-dealer for the sale of shares of common stock, if
required, we will file a supplement to this prospectus.
If
the selling securityholders use this prospectus for any sale of the shares of
common stock, they will be subject to the prospectus delivery requirements of
the Securities Act of 1933.
The
anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
securityholders.
LEGAL
PROCEEDINGS
We are
not presently a party to any litigation, nor to our knowledge and belief is any
litigation threatened or contemplated.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of our Common Stock as of February 6, 2008 for:
|
|
·
|
each
of our executive officers and
directors;
|
|
|
·
|
all
of our executive officers and directors as a group; and
|
|
|
·
|
any
other beneficial owner of more than 5% of our outstanding Common
Stock.
|
Beneficial
ownership is determined in accordance with the rules of the SEC. These rules
generally attribute beneficial ownership of securities to persons who possess
sole or shared voting power or investment power with respect to those securities
and include ordinary shares issuable upon the exercise of stock options that are
immediately exercisable or exercisable within 60 days. Except as otherwise
indicated, all persons listed below have sole voting and investment
power with respect to the shares beneficially owned by them, subject to
applicable community property laws. The information is not necessarily
indicative of beneficial ownership for any other purpose.
|
|
|
Amount
and Nature of Beneficial Owner (1)
|
|
|
Common
Stock
|
Emerald
City Corporation SA (3)
PO
Box 585-1260
Plaza
Colonial
San
Jose, Costa Rica
|
7,750,000
|
35.92%
|
|
|
|
|
|
|
Common
Stock
|
Duffy
Herman & Tricia Morris
1001
Kupulau Drive
Kihei,
HI 96753
|
1,450,000
|
6.72%
|
|
|
|
|
|
|
Common
Stock
|
Suzy
Jafine (In Trust) (4)
80
West Drive
Brampton,
Ontario, Canada L6T 3T6
|
1,450,000
|
6.72%
|
|
|
|
|
|
|
Common
Stock
|
Walter
Martin (5)
20
Sandpiper Ct.
Elmira,
Ontario, Canada
N3B
3C5
|
306,667
|
1.42%
|
|
|
|
|
|
|
Common
Stock
|
David
Williams (6)
Roxborough
Holdings Limited
45
St. Claire Avenue West
Suite
202
Toronto,
Ontario, Canada
M4V
1K9
|
2,712,080
|
12.57%
|
|
|
|
|
|
|
Common
Stock
|
Saul
Brothers Partnership (7)
10850
Hickory Lane
Highlands
Ranch, CO 80126
|
1,450,000
|
6.72%
|
|
|
|
|
|
|
Officers
and Directors
As
a Group (3 persons)
|
|
10,768,747
|
61.77%
|
|
(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 21,575,425 shares
outstanding as of February 6, 2008.
|
|
|
|
|
(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)
|
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.
|
|
|
|
|
(5)
|
Mr. Martin
owns (i) 306,667 shares of our common stock; (ii) warrants to purchase an
additional 240,000 shares of our common stock exercisable at $1.00 per
share; and, (iii) warrants to purchase 25,000 shares of our common stock
exercisable at $1.50 per share.
|
|
(6)
|
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.
|
|
|
|
|
(7)
|
Saul
Brothers Partnership is beneficially owned equally by Ron Saul, Richard
Saul, Lawrence Saul and David Saul. Saul Brothers Partnership does not own
any rights to options, warrants, rights, conversion privileges or any
other similar obligations.
|
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or
is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was
any such person connected with the registrant or any of its parents or
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer, or employee.
The
financial statements included in this prospectus and the registration statement
have been audited by Webb & Company, P.A. an independent registered public
accounting firm, to the extent and for the periods set forth in their
report (which describes an uncertainty as to going
concern) appearing elsewhere herein and in the registration statement, and
are included in reliance upon such report given upon the authority of said firm
as experts in auditing and accounting.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our
directors and officers are indemnified as provided by the Delaware Statutes and
our Bylaws. We have been advised that in the opinion of the Securities and
Exchange Commission indemnification for liabilities arising under the Securities
Act is against public policy as expressed in the Securities Act, and is ,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
ORGANIZATION
WITHIN LAST FIVE YEARS
Alliance
Recovery Corporation is a Delaware corporation originally organized as American
Resource Recovery Group Ltd. in 2001. On April 18, 2002, we filed a certificate
of amendment changing our name to Alliance Recovery Corporation. Our operations
are located in Monroe, Michigan.
TRANSFER
AGENT
The
transfer agent and registrar for our Common Stock is Florida Atlantic Stock
Transfer.
SHARES
ELIGIBLE FOR RESALE
Future
sales of a substantial number of shares of our common stock in the public market
could adversely affect market prices prevailing from time to time. Under the
terms of this offering, the shares of common stock offered may be resold without
restriction or further registration under the Securities Act of 1933, except
that any shares purchased by our “affiliates,” as that term is defined under the
Securities Act of 1933, may generally only be sold in compliance with Rule 144
under the Securities Act of 1933.
SALE OF
RESTRICTED SHARES. Certain shares of our outstanding common stock were issued
and sold by us in private transactions in reliance upon exemptions from
registration under the Securities Act of 1933 and have not been registered for
resale. Additional shares may be issued pursuant to outstanding options and
warrants we are obligated to issue in connection with our private placement
offering of our Preferred Stock and Warrants.
In
general, under Rule 144 as currently in effect, a shareholder, including one of
our affiliates, may sell shares of common stock after at least one year has
elapsed since such shares were acquired from us or our affiliate. The number of
shares of common stock which may be sold within any three-month period is
limited to the greater of: (i) one percent of our then outstanding common stock,
or (ii) the average weekly trading volume in our common stock during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144. Certain other requirements of Rule 144 concerning availability of
public information, manner of sale and notice of sale must also be satisfied. In
addition, a shareholder who is not our affiliate, who has not been our affiliate
for 90 days prior to the sale, and who has beneficially owned shares acquired
from us or our affiliate for over two years may resell the shares of common
stock without compliance with many of the foregoing requirements under Rule
144.
ITEM
23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
AVAILABLE
INFORMATION
We have
filed with the SEC a registration statement on Form S-1 under the Securities Act
with respect to the common stock offered hereby. This prospectus, which
constitutes part of the registration statement, does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto, certain parts of which are omitted in accordance with the
rules and regulations of the SEC. For further information regarding our common
stock and our company, please review the registration statement, including
exhibits, schedules and reports filed as a part thereof. Statements in this
prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement, set forth the material terms of such
contract or other document but are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference.
We are
also subject to the informational requirements of the Exchange Act which
requires us to file reports, proxy statements and other information with the
SEC. Such reports, proxy statements and other information along with the
registration statement, including the exhibits and schedules thereto, may be
inspected at public reference facilities of the SEC at 100 F Street N.E ,
Washington D.C. 20549. Copies of such material can be obtained from the Public
Reference Section of the SEC at prescribed rates. You may call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
room. Because we file documents electronically with the SEC, you may also obtain
this information by visiting the SEC’s Internet website at
http://www.sec.gov .
ALLIANCE
RECOVERY CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
AS
OF SEPTMBER 30, 2007 and 2006
|
NOTE
1
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
|
(A) Basis of
Presentation
The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in The United States of
America and the rules and regulations of the Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all the
information necessary for a comprehensive presentation of financial position and
results of operations.
It is
management's opinion, however that all material adjustments (consisting of
normal recurring adjustments) have been made which are necessary for a fair
financial statements presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
(B) 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.
(C) 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.
(D) 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 September 30, 2007, the Company did not have
any balances that exceeded FDIC insurance limits.
(E) 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.
(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 of 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 September 30, 2007 and 2006, 1,948,647 and
3,032,752; respectively of common share equivalents were anti-dilutive and 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 and144 “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) 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.
|
NOTE
2
|
PROPERTY AND
EQUIPMENT
|
Property
and equipment at September 30, 2007 were as follows:
|
Computer
|
|
$
|
11,166
|
|
|
Less
accumulated depreciation
|
|
|
(8,096
|
)
|
|
|
|
|
|
|
|
|
|
$
|
3,070
|
|
|
|
|
|
|
|
During
the three and nine months ended September 30, 2007 and 2006 and for the period
from November 6, 2001 to September 30, 2007, the Company recorded depreciation
expense of $558, $1,675, $558, $1,675 and $8,096 respectively.
|
Note
Amount
|
|
$
|
25,000
|
|
|
Discount
|
|
|
(37
|
)
|
|
Net
|
|
$
|
24,963
|
|
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. At September 30, 2007
the Company recorded a discount on the notes of $1,500 and amortized $1,463 of
the discount as interest expense.
|
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 September 30, 2007, the Company has an
outstanding balance under the three note agreements of $200,000 and recorded
accrued interest expense of $16,513 related to these three notes.
|
NOTE
5
|
CONVERTIBLE
NOTES PAYABLE - RELATED
PARTY
|
|
Note
Amount
|
|
$
|
90,000
|
|
|
Discount
|
|
|
(1,265
|
)
|
|
Net
|
|
$
|
88,735
|
|
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. As of September 30, 2007 the
Company recorded and accrued interest expense of $2,306 and amortization expense
of $241 related to these two notes.
|
NOTE
6
|
CONVERTIBLE NOTES
PAYABLE
|
|
Note
Amount
|
|
$
|
100,001
|
|
|
Discount
|
|
|
(6,380
|
)
|
|
Net
|
|
$
|
93,621
|
|
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
September 30, 2007 the Company recorded and accrued interest expense of $1,907
and amortization expense of $911 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 September 30,
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 September 30,
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 September
30, 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 September 30, 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 three and nine months ended September 30, 2007 the Company
recorded an expense of $38,175 and $87,023 under this agreement.
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 four months and the consultant to receive
compensation of 333,334 shares of common stock with the fair value of the common
stock of $100,000 ($.30 per share). The fair value of the common stock will be
amortized over the term of the agreement. For the three and nine months ended
September 30, 2007 the Company recorded an expense of $17,500 and $17,500 under
this agreement.
(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.
Between
May and June 2007 two related parties loaned the Company a total of $90,000. The
convertible notes are unsecured, due two years from the date of issuance and
accrue interest at a rate of 8% per annum. In addition, the holders received a
total of 45,000 warrants to purchase one share of our common stock exercisable
within two-year of issuance at an exercise price of $1.00 per
share.
(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 1,948,647 and 3,032,752 warrants outstanding at
September 30, 2007 and 2006, respectively. The Company has reserved 1,948,647
shares of common stock for the future exercise of the warrants at September 30,
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-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. 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 due upon the closing of
the first put.
The
Company is obligated to file a registration statement with the Securities and
Exchange Commission (“SEC”) covering 15,000,000 shares of the common stock
underlying the Investment Agreement within 30 days after the closing date. 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 draw
downs.
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NOTE
9
|
RELATED PARTY
TRANSACTIONS
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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 September 30, 2007 the Company has an
outstanding balance under the three note agreements of $200,000 and recorded
accrued interest expense of $16,513 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 then $.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 fair 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. As of September 30, 2007 the
Company recorded and accrued interest expense of $2,306 and amortization expense
of $241 related to these two 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 $429,718 under the
agreement to the consultant at September 30, 2007. For the Period November 6,
2001(Inception) to September 30, 2007 the Company recorded $1,458,333 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).
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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 $429,718 under the
agreement to the consultant at September 30, 2007. For the Period November 6,
2001(Inception) to September 30, 2007 the Company recorded $1,458,333 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 the 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 three and nine months ended September 30, 2007 the Company
recorded an expense of $38,175 and $87,023 under this agreement.
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 four months and the consultant to receive
compensation of 333,334 shares of common stock with the fair value of the common
stock of $100,000 ($.30 per share). The fair value of the common stock will be
amortized over the term of the agreement. For the three and nine months ended
September 30, 2007 the Company recorded an expense of $17,500 and $17,500 under
this agreement.
(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.
As
reflected in the accompanying financial statements, the Company is in the
development stage with no operations, a stockholders' deficiency of $1,966,290 a
working capital deficiency of $702,181 and used cash in operations from
inception of $1,764,762. 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.
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NOTE
12
|
SUBSEQUENT
EVENTS
|
In
October 2007, the Company sold a total of 174,500 shares of common stock for
gross proceeds of $24,605