UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment 1 to
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Community Alliance, Inc.
(Exact name of registrant as specified
in its charter)
Nevada 42-1663174
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
number)
4980 Silver Pine Drive
Castle Rock, Co 80108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 730-7939
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerate filer, or a small reporting
company as defined by Rule 12b-2 of the Exchange Act):
Large accelerated filer [ ] Non-accelerated filer [ ]
Accelerated filer [ ] Smaller reporting company [x]
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ITEM 1. BUSINESS
General
Community Alliance, Inc. was incorporated under the laws of the State
of Nevada on February 22, 2005. Community Alliance is a wholly owned
subsidiary of Fresh Ideas Media, Inc., a publicly traded Nevada
corporation. On March 26, 2008, Fresh Ideas assigned Community
Alliance all of the common stock of Our Best Wishes, Inc., also a
wholly owned subsidiary of Fresh Ideas. Our Best Wishes has had no
business activity, other than organizational activities, since its
inception on August 30, 2005.
Spin-off from Parent
On September 9, 2008, the board of directors of Fresh Ideas authorized
the spin-off of Community Alliance to Fresh Ideas shareholders of
record as of September 9, 2008. The spin-off is being done in
connection with a proposed Share Exchange transaction between Fresh
Ideas, Ever Auspicious International Limited, a Hong Kong corporation
and Ever Auspicious' sole shareholder, Bright Praise Enterprises
Limited, a British Virgin Islands company. Under the terms of the
spin-off, 7,535,000 shares of Community Alliance's common stock, par
value $0.001 per share, will be distributed on a pro-rata basis to each
holder of Fresh Idea's common stock on the record date without any
consideration or action on the part of such holders, and the holders of
Fresh Ideas' common stock as of the record date will become owners of
100 percent of our common stock. The spin-off will be consummated only
upon the consummation of the Share Exchange, and the satisfactory
resolution of all comments from the Securities and Exchange Commission
to this registration statement on Form 10 and this Form 10's
effectiveness. However, there is no assurance at this time that the
Share Exchange will be consummated, and therefore no assurance that the
spin-off will be consummated.
There is not expected to be any material change in Community Alliance's
management or operations as a result of the spin-off.
Revenues
We expect to generate revenue from the sale of the sub-licenses, which
after the first five are sold, it is our intent to sell the remaining
sub-licenses for $15,000 per sub-license. In addition, we will
generate revenue from the publication fees of $1,900 per school. For
example, if a sub-licensee has 10 schools under contract during one
school period, the publication fee would be $1,900 per school or a
total of $19,000. Under the sub-license agreement, each sub-licensee
is required to use Community Alliance as the publisher of the folders.
Our actual cost of production will depend upon several factors,
including the extent of the art work involved and the printing cost of
the folders. The average net income after printing and graphic design
is projected at $1,200.00 for each school project in each licensed
state. We also intend to generate revenue from our operations in
Colorado, which we now operate under a license agreement.
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The success of our business will depend totally upon our ability sell
sub-licenses in the future for the School Home Folders and the Birthday
Greeting Cards. In addition, it is contemplated that additional
revenues would be generated from the production cost for the folders
and greeting cards, which depend upon the success of each of our Sub-
licensees in the future. If our Sub-licensees are not successful in
their efforts in contracting with schools and selling the advertising
for the folders, we will not, in turn, receive that additional on going
revenue.
From inception, we have sold a total of four sub-licenses. Of the four
sub-licenses that have been sold, only one has paid the full sub-
license fee. One sub-license has been cancelled for non-payment and it
is now doubtful whether the other three sub-licensees will be able to
meet the required payments and make their respective territories
productive.
From the date of our inception through August 31, 2008, we realized
total revenue from the sale of sub-licenses and publication fees for
our take-home school folder product of $52,454 and a net loss of
$(64,277).
Community Alliance Custom School Take-Home Folder Product
The Community Alliance Custom School Take-Home Folder product involves
supplying elementary schools free of charge with what are sometimes
called "take-home folders" that display advertising by community
businesses. Each school signs an agreement with a sub-licensee
permitting Community Alliance to provide the folders for two
consecutive school years. Community Alliance provides each school with
a minimum of two folders per student. We believe that the number of
folders required to be printed per school will range from 800 to 1,500
folders. The schools distribute the folders via the teachers to the
students at the beginning and at the middle of the school year. The
students take the folders home with important information and
communications from school. By publishing their advertisements on the
take-home folders, community businesses sponsor their local school and
develop name recognition in the community. Our customized school take-
home folder replaces generic communications folders currently being
used in elementary schools across the nation. Community Alliance
produces and supplies these custom take-home folders to elementary
schools via sub-licensees at no cost to the schools or the district.
Based upon information available to us, most schools throughout the
United States require the parents to purchase the folders or, in some
cases, the school may supply folders at its expense.
The sub-licensees sell advertisements and sponsorship to community
businesses that display their advertising on the folders. There are
eight to ten advertising spots on each school folder. The
advertisements are priced at $350 to $550 for the year. Pricing for
the advertisements is determined by placement and size, as follows:
- 1/4 front cover - $550;
- Pocket flap - $550;
- 1/3 back cover - $500
- 1/6 back cover - $350.
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Virtually every parent, teacher and child views the advertisements on
the folders every week for an entire school year. Students receive a
high quality folder specifically designed for their school. In
addition to the advertisements, the folders include school pride
elements such as the school logo, important telephone numbers,
calendars and/or handbook information. Local businesses that have an
interest in their communities are the target customers to sponsor the
folders. We believe that the program benefits all parties, as follows:
- our product is an attractive and useful replacement at no charge
for a generic product presently provided by many elementary schools at
their cost or the cost of the parents;
- the parents and students obtain useful information about the
school and its policies and procedures printed on the folders and
community businesses from advertisements displayed on the folders; and
- the community business sponsors benefit from exposure via a
"friendly" medium to their target market on a weekly basis.
We have been selling and will continue to sell sub-licenses for the
school folder program. We have established a one-time sub-license fee
of $15,000 except for the first five territories sold which we have set
at $10,000 in order to induce five persons to purchase sub-licenses.
License Agreement - 45 States
In March 2005, Fresh Ideas acquired the exclusive license in 45 states
to publish and market two advertising products, the Community Alliance
Custom School Take-Home Folder and Our Best Wishes Direct Mail Greeting
Card.
On March 24, 2005, The License Agreement was assigned from Fresh Ideas
Media, Inc. to Community Alliance, Inc. a wholly owned subsidiary of
the Company.
The License Agreement included all of the "Business Concept" developed
by Venitech, Inc. (Licensor) over the previous several years. Venitech,
LLC. has been operating the Business Concept in Colorado under the
trade name of Community Alliance. The Business Concept included the
designs of the products, methods of selling, the art and design of the
products, use of any Intellectual Property, Trade Secrets and Know How
developed by Venitech, LLC., along with the use of any trade marks
and/or copyrights, if any, pertaining to the products.
The licensor excepted five states from the license agreement because
the licensor is aware of and/or has some relationship with other
companies engaged in business to supply elementary schools with custom
school take-home folders in those states. The five states included
Colorado, Florida, Nebraska, Oklahoma and Texas. Venitech, LLC has
been operating in Colorado for several years and desired to retain the
business in Colorado.
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The License Agreement required the payment of $30,000 with an initial
payment of $10,000 and the payment of thirty percent (30%) of any sub-
license fee sold thereafter until the full amount of $30,000 had been
paid. Thereafter, Community Alliance was required to pay the Licensor
20% of each sub-license sold.
The license was for a period of five years through May 15, 2010 with
the right to renew for an additional three years through May 15, 2013.
The License Agreement also required Community Alliance to sell three-
sublicenses in the first year through March 14, 2006 and that we sell a
minimum of four sub-licenses during each period thereafter through
August 14, 2007, March 14, 2009 and March 14, 2010 respectively.
The License Agreement also required Community Alliance and/or any sub-
licensee to use Community Alliance of Colorado for all production of
the products, including art and design and printing of the products. A
publication fee of $1,900 per individual school folder was established.
The License Agreement also included business concept, intellectual
property, trademark and copyrights and know-how relating to a direct
mail greeting card product, called "Our Best Wishes" in the same 45
states. Community Alliance has not yet attempted to develop the
greeting card program in any state.
On October 30, 2007 the License Agreement was amended to state that
three sub-licenses would need to be sold in the first 12 months of the
Agreement and that for a payment of $10,000 to the Licensor, Community
Alliance would not be required to sell any sub-licenses in the years of
2006 and 2007 and would be required to sell a minimum of two
sublicenses in 2008 and each year thereafter. The $10,000 was paid to
Venitech, LLC. in compliance with the Agreement.
If Community Alliance does not comply with the terms of the License
Agreement, the Licensor may cancel the Licensor Agreement upon a 60 day
notice.
The term of the license agreement, with Venitech, LLC, and addendums
thereto, is for a period of five years through May 15, 2010, with the
right to renew the agreement for an additional three years through May
15, 2013 under certain circumstances. Our right to renew the license
agreement is contingent on the following:
- We sell three sub-licenses in the first year of the license
agreement through March 14, 2006, which we did. There is no
minimum requirement for the years of 2006 and 2007 and thereafter
we are required to sell a minimum of two sub-licenses each year.
- We are not delinquent in the payment of any fees required
to be paid to Venitech under the terms of the license agreement.
- We are not otherwise in default under the license
agreement.
- We give Venitech written notice of our intent to renew the
license agreement no later than February 15, 2010.
Community Alliance is in compliance with the terms of the License
Agreement to date.
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License Agreement - Colorado
On February 6, 2008, we entered into a license agreement which
Venitech, LLC for the rights to publish and market two advertising
products, the Community Alliance Custom School Take-Home Folder and Our
Best Wishes Direct Mail Greeting Card in the state of Colorado with the
exception of Jefferson County. Venitech, LLC desires to retain
Jefferson County for the time being.
For the past two years, the Jefferson county school projects have been
implemented by Raine Daily, the sister of Ruth Daily. By mutual
agreement, Raine Daily will continue providing take home folders to
Jefferson County schools under "Raine Daily's own separated business
arrangements. Going forward the revenues generated in Jefferson county
are separate from Community Alliance. Excluding Jefferson County,
there are 300 elementary schools in Colorado, 38 of which are currently
participating in the program. Community Alliance is confident that
additional revenues can be generated by offering the school folder
program to the remaining counties in Colorado.
We paid a total of $20,000 for the license, with $10,000 being paid
within 90 days of the signing of the agreement and an additional
$10,000 to be paid within 190 days of the signing of the agreement or
on August 14, 2008. In addition, Venitech, LLC will receive twenty
percent (20%) of the net profit of all sales in the Colorado Territory.
The term of the License if for five years and will terminate on
February 10, 2010 with the right to renew for an additional three years
provided:
A. Guaranteed Minimun of sales of schools are under contract in any
given year as per Article 5 of the Agreement.
B. All fees which are due and payable by the Licensee to the
Licensor are paid as per the terms of the Agreement.
C. Licensee is not otherwise in default under the Agreement and
D Licensee gives Licensor notice in writing of its intent to renew
no later than January 15, 2010.
We have paid the $10,000 to Venitech.
An Addendum to the Agreement was entered into on July 28, 2008, stating
that the $10,000 payment would be waved and that Venitech, LLC would
receive a total of 25% of the net profit from advertising sales until
the additional amount received would total the amount of $10,000 and
thereafter Venitech, LLC would receive 20% of the net profit from the
sales of advertising.
In addition, the License Agreement requires that the Company has a
minimum of 20 schools under contract in the first year of the
agreement. There are presently 38 schools under contract in the
territory.
If Community Alliance does not keep a minimum of 20 schools under
contract each year, the Venitech, LLC has the right to cancel the
Agreement.
7
Ruth Daily, the principal of Venitech, LLC, the Licensor, and a major
shareholder of Fresh Ideas prior to the spin-off and who will be a
major shareholder of Community Alliance after the spin-off, has been
operating the business in Colorado for approximately five years and has
38 schools under contract with an annual revenue of between $70,000 and
$100,000. Ruth Daily is now an officer and director of Community
Alliance.
Ruth Daily will work for Community Alliance in the state of Colorado
and will receive commissions for sales made in the state. Commissions
will be 25% of the net profit from the sales of advertising in the
state of Colorado.
Ruth Daily, who is presently an officer, Director and major shareholder of
the Company, will work for Community Alliance, Inc, as a sales
representative in the state of Colorado and will receive sales commissions
of 20% of all advertising sales made in the state of Colorado.
In addition, as per the License Agreement between Venitech and Community
Alliance, Inc., Venitech will receive 25% of the net profit for the state
of Colorado until the License fee is paid in full. Ruth Daily is the sole
owner of Venitech.
Sub-licenses for custom take-home school folders
Community Alliance has been engaged in selling sub-licenses for the
custom take-home school folder product. Our primary business to date
has been the sale of sub-licenses to market the custom school take-home
folder product in three states. On February 6, 2008, Community
Alliance acquired the going business of the school folders in the state
of Colorado, and is now actively working with schools in Colorado with
the school folder program. Venitech, LLC, the licensor of the school
folder program, has been operating the business in Colorado for the
past five years.
Established Fees for Sub-license
The fee for a Sub-licensee to acquire a territory for the School Folder
Program has been set at $15,000. However, it is the intent of the
company to sell the first 5 Sub-licenses for $10,000 for marketing
purposes, and thereafter sell the Sub-license for $15,000.
Sub-licenses Sold Since Inception
We have sold four sub-licenses prior to March 14, 2006, as required
under the terms of the License Agreement and addendums thereto. We
were not required to sell a minimum of sub-licenses in 2006 and 2007 in
order to maintain the right to renew the agreement. We are required to
sell a minimum of two sub-licenses each year thereafter.
Delay in the Sale of Additional Sub-Licenses
Ruth Daily, who became an officer and director of Community Alliance on
February 4, 2008, learned last year that she would be leaving the
United States for a period of time. She left in October of 2007, has
returned to the US twice briefly since that time, and is expected to
8
return for good in December of 2008. While she has been involved with
keeping the schools under contract in Colorado during her absence, she
felt that since she would not be available to train new Sub-licenses,
and that, under the circumstances, marketing the sub-licenses during
this past year would not be wise for Community Alliance.
It is the intent of Community Alliance to commence the marketing of the
sub-licenses in the first quarter of 2009. In the meantime, we will
continue to market the products in the state of Colorado.
Possible Sub-Licensee Territories.
We divided the 45 states licensed into a possible 52 territories that
we believe are ideal in size for a sub-licensee based upon population
density and the estimated number of elementary schools located within
the area. The suggested 52 territories are only estimates and
Community Alliance may change the estimated territories at any time,
depending upon the circumstances.
Activity of Present Sub-licensees
Arizona
- -------
The Arizona sub-licensee purchased the Sub-license on November 5, 2005
and paid the full $10,000 upon the signing of the sub-license Agreement
and has placed schools under contract and has met the requirements of
the sub-license.
The sub-license agreement is for a period of five years with the right
to renew and can be renewed if the sub-licensee has a minimum of 25
schools under contract at the time of renewal.
Missouri
- --------
The Missouri Sub-licensee, CTN Enterprises, paid $2,500 deposit on the
$10,000 fee. They immediately contracted with and delivered folders to
seven schools. By addendum to the Licensing Agreement, CTN was
required to pay an additional $2,500 to be paid on February 1, 2007 and
a final payment of $5,000 to be paid on or before June 1, 2007.
However, the partnership broke up and they have stopped signing up
schools and have not paid the balance due on the Sub-license Agreement.
We have terminated their Agreement.
Kentucky - Tennessee
- --------------------
The sub-license, Frontier Digital Media, LLC, for a territory
encompassing certain counties in Kentucky and certain counties in
Tennessee has not yet initiated business that Territory. The principal
of Frontier Digital Media, LLC is the daughter of Mr. Ray, the
president of Fresh Ideas Media, Inc. and Community Alliance, Inc.
An addendum was entered into on May 7, 2008, that requires the payment
of $2,000 on or before January 30, 2009 and the balance of $7,000 on or
before December 31, 2009
Ohio
- ----
The bub-license in the state of Ohio, was signed on November 28, 2005.
The terms of agreement stated that the license fee was $10,000 with
$2,000 being paid at the signing of the agreement, another $1,000 to be
paid on or before June 1, 2006 and the full balance of $7,000 due on or
before June 1, 2007. In an addendum to the license agreement dated
December 31, 2006, the payment for the made the second payment of
$1,000 due on or before May 341, 2007 and the balance of $7,000 due on
or before December 31, 2007. The sublicense, Rachelle Hagerty, is the
daughter of Mr. Ray, an officer and director of Community Alliance,
Inc.
In 2007, The sub-licensee learned that her husband, a doctor, was going
to be seeking employment at a hospital in another state and she
believed that it would be unwise to start a business that she would be
forced to leave in the not to distant future. She has requested that
the license agreement be amended and changed to the state of
Washington. Community Alliance is considering it.
Community Alliance is currently in discussions with sub-licensee prospects
for the states of Wyoming, New Mexico, Virginia and Maryland. As soon as
practicable a full scale marketing will be initiated to obtain sub-license
sales in the identified territories. The marketing will include listings
on recognized employment websites, local newspaper advertising and other
community based marketing campaigns.
Sub-License Agreement with Our Best Wishes
Community Alliance intends to transfer the business concept,
intellectual property, trademarks, copyrights and know-how relating to
the direct mail greeting card product in the 45 states of the United
States covered by the license agreement to our wholly-owned subsidiary,
Our Best Wishes. Our Best Wishes will sub-license the rights to the
greeting card product to sub-licensees in up to 52 sub-license
territories in these 45 states.
The fee for a sub-license for a sub-license territory will be $15,000,
except for the first five sub-licenses, which we will grant free of
charge to existing sub-licensees of Community Alliance for the school
take-home folder product. After the first five sub-licenses, we will
offer existing sub-licensees for the school folder product the first
right to purchase sub-licenses to market the greeting card product. We
will permit a sub-licensee to make a deposit and pay the balance of the
sub-license fee over time in certain instances.
The sub-license agreement will require the sub-licensee to conduct a
minimum of 24 quarterly direct-mail campaigns per year after the
initial five years in order to maintain and renew the sub-license
agreement. The sub-licensee is required to use Our Best Wishes for
production of the direct-mail greeting card product. We have
established a publication fee of $4,200 per quarterly zip code mailing
campaign. This fee covers the purchase price of mailing lists and the
graphic design, production, printing and mailing of, and overhead and
profit to Our Best Wishes on, the direct-mail campaigns.
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We have finalized the business concept and design of the Our Best
Wishes Greeting Card product. However, we have not yet sold any sub-
licenses to market the greeting card product. We believe that this
product will be an effective advertising tool for businesses to
directly target their market in the community.
We intend to start testing the greeting card program in the second
quarter of 2009 and offering the program to Sub-licensees in the third
quarter of 2009.
Recent Developments
On November 10, 2008, Fresh Ideas entered into a Share Exchange
Agreement with Ever Auspicious International Limited, a Hong Kong
company and Bright Praise Enterprises Limited, the sole shareholder of
HKCo. On the closing date, November 11, 2008, Fresh Ideas acquired all
of the issued and outstanding capital stock of HKCo from the majority
stockholder in exchange for an aggregate of 11,700,000 newly-issued
shares of Fresh Ideas' common stock, which constitutes approximately
64.64% of Fresh Ideas' issued and outstanding common stock. The Share
Exchange is intended to constitute a tax-free reorganization pursuant
to the provisions of Section 368(a)(1)(B) of the Internal Revenue Code
of 1986. The consummation of the Share Exchange resulted in a change
in control of Fresh Ideas. Pursuant to the Share Exchange Agreement,
Fresh Ideas' board expanded its membership to the seven (7) members,
and Ms. Alice Terry Ray, a current director, Treasurer and Secretary of
Fresh Ideas, resigned from her positions as officer and director of
Fresh Ideas effective as of the consummation of the Share Exchange.
Mr. Phillip E. Ray, a current director, president and chief executive
officer of Fresh Ideas resigned from his positions as officer of Fresh
Ideas effective as of the consummation of the Share Exchange, and will
resign as a director of Fresh Ideas effective on November 21, 2008.
Mr. Tong Shiping became a director of Fresh Ideas effective upon the
consummation of the Share Exchange. Howard S. Barth, Yang Bin, Gao
Yang, Qu Zhong, Kong Xiaoyan and Cheng Weihong will become directors of
Fresh Ideas effective on November 21, 2008.
On November 21, 2008 or shortly thereafter, Fresh Ideas intends to
amend its Articles of Incorporation and amend and restate its bylaws in
their entirety so as to, among other things, change the name of Fresh
Ideas, provide the board of directors with greater flexibility in their
management of the affairs of Fresh Ideas (including allowing the board
of directors to amend the bylaws from time to time without ratification
by the stockholders), provide increased indemnification protection to
our directors so as to facilitate the appointment and retention of
qualified directors, and institute certain standard procedures with
respect to the meetings of stockholders and the nomination of
directors. The board will approve the amendments and recommend the
stockholders approve and adopt such amendments.
Terms of the Share Exchange
Under the terms of the Share Exchange: (a) Fresh Ideas acquired all of
the issued and outstanding capital stock of HKCo from the majority
stockholder, and in exchange, the majority stockholder received an
aggregate of 11,700,000 newly-issued shares of Fresh Ideas' common
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stock, which will constitute approximately 64.64% of Fresh Ideas issued
and outstanding common stock; and (b) the Share Exchange will qualify
as a transaction in securities exempt from registration or
qualification under the Securities Act of 1933, as amended (the "Act")
and under the applicable securities laws of the state or jurisdiction
where the Majority Stockholder resides.
Agreement of Directors to Resign
In connection with the closing of the Share Exchange, Ms. Alice Terry
Ray, a current director, treasurer and secretary of Fresh Ideas, will
resign from her positions as officer and director of Fresh Ideas
effective as of the consummation of the Share Exchange. Mr. Phillip E.
Ray, a current director, president and chief executive officer of Fresh
Ideas will resign from his positions as officer of Fresh Ideas
effective as of the consummation of the Share Exchange, and resign from
his position as a director of Fresh Ideas effective on or about
November 21, 2008.
Mr. Tong Shiping became a director of Fresh Ideas effective upon the
consummation of the Share Exchange. Howard S. Barth, Yang Bin, Gao
Yang, Qu Zhong, Kong Xiaoyan and Cheng Weihong will become directors of
Fresh Ideas effective on or about November 21, 2008.
Promotion and Advertising
We intend to initially rely upon referrals and advertising in
newspapers to locate potential sub-licensees.
Trademarks, Patents and Intellectual Property
Venitech, the licensor, granted to us the exclusive license to publish
and market two advertising products, the Community Alliance Custom
School Take-Home Folder and Our Best Wishes Greeting Card, including
the right to use the trademarks, "Community Alliance" and "Our Best
Wishes," in 45 states of the United States. The licensor intends to
apply for both trademarks in the future but has not yet secured
registration for the trademarks, "Community Alliance" and "Our Best
Wishes," in the United States or any other country.
We are not relying on the use of patents and trademarks for our
business.
In any given market, a competitor may sell the same products and
services that we sell under any business name that they desire. We
have no exclusive right to the idea, but only to the business concept
as developed by Venitech. If a competitor is or commences marketing of
school take-home folders or a greeting card similar to the Our Best
Wishes Greeting Card, it could have a material adverse effect on our
business. This competition could either limit the growth and sales by
our sub-licensees or keep them from conducting business altogether. If
this were to happen in a number of proposed territories, it could have
a major adverse effect on our business.
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We know of no particular barriers that exist at this time that would
keep us from entering any market for which we have a license. We know
of no one producing school take-home folders such as we produce in the
licensed territory of the 45 states. At this time, we do not believe
that we will compete with a similar business. However, some schools
may desire to continue to provide take-home school folders to their
students, or they may continue to require the parents to provide the
folders.
Despite the licensor's efforts to protect its proprietary rights,
unauthorized persons may attempt to copy aspects of the custom school
take-home folder and greeting card programs, product information and
sales mechanics or to obtain and use information that the licensor
regards as proprietary. We depend upon the licensor to adequately
protect or enforce the intellectual property rights in connection with
these products. The failure of the licensor to adequately protect its
intellectual property rights or any encroachment upon the proprietary
information, the unauthorized use of the trademarks, the use of a
similar name by a competing company or a lawsuit initiated against us
for our infringement upon another company's proprietary information or
improper use of their trademark, may affect our ability to create brand
name recognition, cause customer confusion and/or have a detrimental
effect on our business. Third parties may also claim infringement by
us with respect to past, current or future programs.
Government Regulation
Government approval is not necessary for our business. We anticipate
that government regulations will have little or no effect on our
business except insofar as their applicability to businesses generally.
Competition
The marketing and advertising markets in which we expect to compete are
intensely competitive and Community Alliance and/or the sub-licensees
may not be able to compete in the market(s) effectively. We expect
significant competition from the existing competitors in these markets,
including newspapers, television, radio, magazines, billboards, direct-
mail and numerous other businesses looking for ways to spend their
advertising dollars. Most of these companies are substantially larger
and have more substantial operating histories and records of successful
operations; greater financial resources, technical expertise,
managerial capabilities and other resources; more employees; and more
extensive facilities than we have or will have in the foreseeable
future. Our sub-licensees must compete with these established
companies for their advertising dollars.
Community Stars, LLC, a company operated by Ms. Daily's sister that
currently supplies, or intends to supply, elementary schools with take-
home folders in the five states excepted from our license agreement,
may in the future attempt to offer its products in the 45 states in
which we intend to operate. Further, it is possible that competitors
exist of which we are unaware and/or that might start the same or a
similar business in any given area within the 45 states covered by our
license agreement. If this occurs, it could adversely affect our sub-
licensee in that area; keep the sub-licensee from operating
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effectively; or keep us from selling a sub-license in that area. We
are aware of two other companies selling direct-mail birthday pieces in
their respective States of Florida and Missouri. We have no recourse
against anyone desiring to conduct the same business as us in any of
the 45 states in the licensed territory.
Employees
We have no full-time employees. All activities since our organization
have been undertaken by our officers as needed. Our officers do not
currently spend all of their time on our business and estimate they
devote approximately 20% of their business time on the business of
Community Alliance. We anticipate that we will begin hiring employees
as needed to support our anticipated growth. Ruth Daily, an officer
and director of Community Alliance will be actively working for
Community Alliance in the State of Colorado on a commission basis, as
well as training any new Licensees that Community Alliance may acquire
in the future.
Subsidiaries
We have one wholly owned subsidiary, Our Best Wishes, Inc., a Nevada
corporation which has no business activity at this time.
ITEM 1A. RISK FACTORS
A. We have had very little operating history and it is difficult for
you to evaluate our business prospects.
We cannot predict whether we will succeed because there has been very
little operating history and, accordingly, you will have no basis upon
which to evaluate our ability to achieve our business objective.
Community Alliance is a development stage company. We have only begun
revenue-generating operations in a very limited way. To date, the only
revenue-generating activity has been the sale by Community Alliance of
four sub-licenses to publish and market the custom school take-home
folder product, resulting in the receipt of minimal sub-license and
publication fees. However, only one of those Sub-licensees have has
been active, two have not started the business in their territories and
one has been cancelled for non-performance. There can be no assurance
that we will ever reach a level of profitability. Our revenue and
income potential is yet unproven, and the lack of operating history
makes it difficult to evaluate the future prospects of our business.
You should view our operations as being subject to all of the risks
inherent in the establishment of a new business venture.
B. Operating results may fluctuate and we may fail to meet our
expectations.
Our operating results in one or more future periods could likely
fluctuate significantly and may fail to meet or exceed the expectations
of investors. As we continue our operations, we expect significant
14
fluctuations in future results of operation because of a variety of
factors, many of which are beyond our control, including, but not
limited to:
- The ability of sub-licensees to contract with schools for the
folder program and to market the advertising that will be printed on
the folders;
- Demand for and market acceptance of our products and consulting
services;
- Our ability to expand our market share;
Competitive factors that affect our pricing structure;
- The variety and mix of products we sell;
- The timing and magnitude of our capital expenditures, including
costs relating to the development, marketing and continued expansion of
operations;
- Conditions specific to the public grade schools and general
economic factors; and
- Changes in generally accepted accounting policies, especially
those related to our business.
C. We are a development stage company that may not be able to develop
our business plan.
Because we are a development stage company with limited funds, we may
not be able to develop our business into a significant revenue-
generating operation. Our ability to develop the business into an
operation generating significant revenue will depend on a number of
factors, which include the ability to:
- Provide advertising and consulting products and programs that are
reliable and cost-effective, and accommodate any significant increase
in the number of users;
- Select sub-licensees who have the capability to market and
advertise our products and programs effectively;
- Continue to grow our infrastructure to accommodate an increasing
number of sub-licensees and new developments in advertising sales;
- Establish and/or maintain relationships with printers for the
products that will allow us to sell products at a profit;
- Hire, retain and motivate qualified personnel; and
- Effectively respond to competition.
If we are unsuccessful in meeting these challenges and/or addressing
the risks and uncertainties associated with operating a business with
limited funds, we will not be successful, and any investment made in
our common stock would decline in value or be completely lost.
D. Our auditors have raised substantial doubt about our ability to
continue as a going concern.
The report of Ronald R. Chadwick, P.C., the independent registered
public accounting firm that audited our financial statements for the
fiscal year ended November 30, 2007, and Note 1 to the financial
15
statements, raises substantial doubt as to our ability to continue as a
going concern because we realized a net loss of $(9,734) during the
year and we had a working capital deficit as of November 30, 2007.
E. We may not be able to expand or become profitable.
We may not be able to obtain and expand a customer base of sub-
licensees satisfactorily and, therefore, we may never become
profitable. The sale of advertising to be displayed on school folders
and direct-mail greeting cards is a relatively new and emerging market.
Even though the school folder program has been successful in several
states, there can be no assurance that customers will adopt the
products we plan to sell through sub-licensees and, if so, in a
quantity sufficient to enable the sub-licensees and, therefore,
Community Alliance, to succeed. Accordingly, we cannot accurately
predict the potential demand for our products. We believe that the
acceptance of our products will depend on the ability to:
- Select sub-licensees who market our advertising products
effectively;
- Attract and retain sub-licensees and provide high quality support
to sub-licensees such that they are able to develop repeat business
from schools and advertisers;
- Produce, distribute and price our products and programs in a
manner that is appealing to customers and users;
- Develop and maintain a favorable reputation among our sub-
licensees, sponsors for the advertising displayed on our products and
potential sub-licensees and sponsors; and
- Withstand downturns in general economic conditions or conditions
that would slow sales of our products.
Many of the factors that may affect the development and expansion of a
customer base of sub-licensees are beyond our control. If we are unable
to expand our customer base, it will negatively impact the ability to
generate revenues and, in turn, prevent us from becoming a profitable
business.
F. Revenue will be dependent upon success of each sub-licensee; sub-
licensees may not be successful.
The revenue we generate from operations will be dependent upon the
success of the business of each sub-licensee and the results of each
sub-licensee may vary, thus causing our revenue to fluctuate. We have
acquired the exclusive license rights in 46 states to two advertising
products, including the Community Alliance Custom School Take-Home
Folder and Our Best Wishes Greeting Card products. Although the
viability of the custom school take-home folder product has been
demonstrated in several states in the United States, the concept of
marketing the products through sub-licensees has not been proven. We
will receive a sub-license fee upon the sale of each sub-license and
publication fees for the production, printing and delivery of products
to the sub-licensees and the creation of advertisements for the
sponsors. Accordingly, our revenue and, therefore, the success of our
operations will be directly dependent upon the volume of business
generated by the sub-licensees. To the extent that the sub-licensees
16
fail to sell sufficient advertising in their respective territories of
operation in order to make the custom take-home school folder and
greeting card programs profitable, we may be unable to generate
sufficient revenue from publication fees in order to achieve profitable
operations or break even. As a result, we may not be able to continue
in business as a going concern and our common stock would lose some, if
not all, of its value. As of October 31, 2008, only two of our sub-
licensees have sold advertising for the school folders in their
respective territories. It is doubtful as whether the other two sub-
licensees will be able to make a success in their respective
territories.
G. Operating expense may increase and the increase may not be offset
by an increase in revenue and may result in significant losses.
In the future, we expect that our operating expenses will increase as
we grow and expand. The anticipated increase in our operating expenses
will depend entirely on the rate of our growth and the addition of new
programs and services. Because we are unable to predict our growth
rate or the timing of the addition of new programs and services, we are
unable to quantify the amount by which operating expenses may increase
or the timeframe for the increase(s). We anticipate that the increase
in operating expenses will also include general and administrative
expenses as well as professional fees and expenses, which will increase
as a result of our reporting obligations under the Securities Exchange
Act of 1934. Although we believe that revenue generated from our
business operations will meet our needs for growth of the company, it
is possible that the expenses may not be offset with revenue, thereby
resulting in losses for the company. If revenue falls below our
expectations and we are unable to reduce spending in response, our
operations will be adversely affected, which may result in significant
losses from which we may be unable to recover.
H. We may need additional funds that we may not be able to obtain and
the lack of necessary funds would adversely impact our growth.
Generating sufficient revenue from the sale of sub-licenses and/or
raising sufficient funds from additional equity and/or debt financing
in order to sustain the growth and expansion of the business could be
necessary. Any shortfall of capital, whether the inability to raise
funds or generate revenue, would adversely impact the progress and
development of our business, and negatively impact the potential to
generate revenue and reach a level of profitability in the future.
Future equity or debt financing may not be available to us on favorable
terms or may not be available at all. Borrowing instruments such as
credit facilities and lease agreements will likely have restrictions on
lending money to a development-stage company with little or no assets,
such as ours. Our inability to obtain additional capital on
satisfactory terms may delay or prevent the expansion of our business,
which would cause the business and prospects to suffer.
I. We are required to sell addition sub-licenses each year. If we
fail to do so, we may lose our rights under the license agreements.
17
We have sold four sub-licenses as of the date of this filing, as
required in order to maintain our right to renew the license agreement
with Venitech. By an Amendment to the License Agreement, we are not
required to sell a minimum of sub-licenses in 2006 and 2007, however we
are required to sell a minimum of two sub-licenses in 2008 and each
year thereafter. If we fail to sell an additional two sub-licenses in
2008 and each year thereafter, we may lose all rights under the license
agreement to market and publish the two advertising products, including
the Community Alliance Custom School Take-Home Folder and Our Best
Wishes Direct Mail Greeting Card products, which are the basis for our
business plan. If we were to lose these rights, we would go out of
business and an investor in our common stock would lose his entire
investment.
J. The markets in which we will compete are intensely competitive and
we may not be able to compete successfully.
The marketing and advertising markets in which we expect to compete are
intensely competitive and Community Alliance and/or the sub-licensees
may not be able to compete in the market(s) effectively. We expect
significant competition from the existing competitors in these markets,
including newspapers, television, radio, magazines, billboards, direct-
mail and numerous other businesses looking for ways to spend their
advertising dollars. Most of these companies are substantially larger
and have more substantial operating histories and records of successful
operations; greater financial resources, technical expertise,
managerial capabilities and other resources; more employees; and more
extensive facilities than we have or will have in the foreseeable
future. Our sub-licensees must compete with these established
companies for their advertising dollars. Community Stars, LLC, a
company operated by Ms. Daily's sister that currently supplies, or
intends to supply, elementary schools with take-home folders in the
five states excepted from our license agreement, may in the future
attempt to offer its products in the 45 states in which we intend to
operate. Further, it is possible that competitors exist of which we
are unaware and/or that might start the same or a similar business in
any given area within the 45 states covered by our license agreement.
If this occurs, it could adversely affect our sub-licensee in that
area; keep the sub-licensee from operating effectively; or keep us from
selling a sub-license in that area. We are aware of two other companies
selling direct-mail birthday pieces in their respective States of
Florida and Missouri. We have no recourse against anyone desiring to
conduct the same business as us in any of the 45 states in the licensed
territory.
K. Registration for trademarks has not yet been secured and we may not
be able to defend our trademarks and we may be subject to infringement
claims from others.
We depend upon the licensor to adequately protect or enforce the
intellectual property rights in connection with the custom school take-
home folder and greeting card products, and the failure of the licensor
to do so may affect our ability to create brand name recognition, cause
customer confusion and/or have a detrimental effect on our business.
We hold the exclusive license from Venitech to publish and market two
advertising products, the Community Alliance Custom School Take-Home
18
Folder and Our Best Wishes Greeting Card, including the right to use
the trademarks, "Community Alliance" and "Our Best Wishes," in 45
states of the United States. To our knowledge, the licensor has not
yet secured registration for the trademarks, "Community Alliance" and
"Our Best Wishes," in the United States or any other country. Despite
the licensor's efforts to protect its proprietary rights, unauthorized
persons may attempt to copy aspects of the Community Alliance Custom
School Take-Home Folder and Our Best Wishes Greeting Card programs,
product information and sales mechanics or to obtain and use
information that the licensor regards as proprietary. Any encroachment
upon the proprietary information, the unauthorized use of the
trademarks, the use of a similar name by a competing company or a
lawsuit initiated against us for our infringement upon another
company's proprietary information or improper use of their trademark,
may affect our ability to create brand name recognition, cause customer
confusion and/or have a detrimental effect on our business. Third
parties may also claim infringement by us with respect to past, current
or future programs. We expect that participants in our markets will be
increasingly subject to infringement claims as the number of services
and competitors in our industry segment grows. Any claim, whether
meritorious or not, could be time-consuming, result in costly
litigation or cause service upgrade delays.
L. Two principals control approximately 40% of our common stock and
have significant voting control over all matters pertaining to the
company.
By reason of their percentage share ownership, Phil E. Ray, a director
and president of Community Alliance, and Ruth Daily, a director and
officer of Community Alliance, have significant control over all
matters submitted for shareholder approval. Mr. Ray and Ms. Daily each
currently own approximately 20%, or a total of approximately 40%, of
our outstanding common stock. As a result, they have significant
control over the outcome of all matters submitted to a vote of
shareholders, which may include the election of directors, amendments
to the articles of incorporation and approval of significant corporate
transactions.
M. Officers may not be able to spend the necessary time to make the
company a success.
Each of Phil E. Ray, President and a director of Community Alliance,
and Alice Terry Ray, a director and Secretary of Community Alliance,
expect to contribute an average of 20 hours per week to company
business initially. Ruth Daily, an officer and director of Community
All will be spending whatever additional time is required to continue
to operate the business in the State of Colorado, as well as other
activities for the Company. Ms. Daily will continue to sell
advertising for the school folders as well as contract with schools for
the distribution of the folders. She will be receiving a commission on
all advertising sold in the State of Colorado.
If, and as, we progress and our business expands, Mr. and Ms. Ray
intend to increase the time they spend on our business and affairs in
order to ensure implementation of our business plan. Further, as
19
capital and/or revenue become available, we intend to add additional
personnel. Both Mr. and Ms. Ray currently spend a substantial amount
of their time with other companies of which they are officers,
directors and/or principals, and this may create a conflict of interest
insofar as where they devote their time. Mr. Ray owns the majority
interest in and manages VentureVest Capital Corporation and American
Business Services, Inc., two Denver, Colorado-based business consulting
companies, and Ms. Ray serves as the Secretary of American Business
Services and VentureVest Capital Corporation. While both Mr. and Ms.
Ray intend to spend the necessary time to make the company a success,
it may be possible that the amount of time that they can spend may not
be sufficient for the furtherance of our business plan, thereby
reducing the chances for our success. If either individual is required
to devote substantial amounts of time to VentureVest Capital's and/or
American Business Services' affairs in excess of his or her current
commitment level, it could materially limit his or her ability to
devote time to our affairs and could have a material negative impact on
us.
N. Our success will depend upon our present officers and the loss of
their services could have a very negative effect on us.
Our success will substantially depend upon Phil E. Ray, Alice Terry
Ray, and Ruth Daily, our management, and the loss of their services
could materially adversely affect our ability to operate. We will be
heavily dependent upon the skills, talents and abilities of our
executive officers and sole director to implement our business plan.
We may find, from time to time, that the inability of Mr. or Ms. Ray or
Ms. Daily to devote his or her full time and attention to our business
results in a delay in progress toward implementing the business plan.
Further, although both Mr. and Ms. Ray and Ms. Daily have experience
with development-stage companies and Mr. Ray has extensive experience
in advertising and marketing and Ms. Daily has experience in the School
Folder program, neither individual has any experience in marketing sub-
licenses for advertising products. This lack of experience may result
in management's inability to develop and manage the business in a
manner that is beneficial to our shareholders and us. Nevertheless, we
believe that our success depends on the continued service of our
management. We cannot assure you that these individuals will remain
with us for the immediate or foreseeable future. We do not have an
employment agreement with either of our current executives and we do
not expect to enter into an employment agreement with either of them
until business operations increase and a more extensive time commitment
is necessary. Further, if Mr. Ray, Ms. Ray and/or Ms. Daily resigns,
new management's actions and views may not satisfy our former
management, thus motivating Mr. Ray or Ms. Daily and/or others, to sell
their shares and thereby potentially depress the share price.
O. Employment of additional personnel may be difficult.
We intend to employ additional management and sales and other personnel
as we implement our business plan. There can be no assurance that we
will attract and retain key technical and other employees in the
future. If we are unable to attract and retain the necessary
20
management, sales and other personnel, it would limit or prevent us
from implementing our proposed business and, possibly, from generating
significant revenue.
P. Inability to manage growth would adversely affect Community
Alliance.
Although we believe that we can manage the growth of Community Alliance
as projected, the planned expansion will require additional personnel
as well as the normal development of operation controls and systems
required in a growing company. As we have developed our business plan
around the projected growth, we cannot be certain that we will be able
to attract the needed personnel and/or develop the necessary operation
controls and systems required for future growth. However, we believe
that the experience of the present personnel in developing early stage
companies, and their experience in advertising, will be an asset in the
growth of the company. Growth of Community Alliance, and our ability
to manage the growth, if it occurs, will depend on several factors,
including, but not limited to:
- Development and maintenance of a system and method for obtaining
sub-licensees in the 45 states in the licensed territory;
- Development of the ability to properly train and support sub-
licensees in their territories of operation; and
- Significant expansion of our internal management and financial
controls in order to maintain operational control and provide adequate
staff support as our size and number of personnel increase.
If we are unable to achieve any of the above objectives, it would
negatively impact the potential to grow our business. As a result, the
value of the shares would depreciate significantly.
Q. Due to the lack of a public market for our common stock, and the
risk that one may never develop, investors may not be able to sell
their shares.
There is no public market for our common stock and no assurance that
one will develop. While we intend to attempt have our common stock
quoted on an exchange in the future, either the Pink Sheets or the
OTCBB, there is no assurance that this can happen. Any one purchasing
shares in the Company may be at risk of not being able to sell those
shares on the open market. Purchase of shares in the Company presents
a high degree of risk.
R. Even if our stock becomes quoted on an exchange, it will be thinly
traded and highly volatile and may not increase in value to offer a
return to the investor.
Even if our common stock is eventually approved for quotation by a
market maker through the Over-the-Counter Bulletin Board, stocks traded
over this quotation system are usually thinly traded, highly volatile
and not followed by analysis. Any market that develops for purchases
and sales of our common stock is likely to be limited. Accordingly, we
anticipate that our common stock will be, if at all, very thinly traded
and the sale of a limited number of shares could cause the price to
21
fall sharply. As a result, it may be difficult to sell shares of our
common stock without significantly depressing the value of the shares.
Unless we are successful in developing continued investor interest in
our common stock, sales of our stock could continue to result in major
fluctuations in the price of the stock. We do not expect to be able to
obtain security or industry analyst coverage and our common stock may
not have visibility in the financial markets because of this. The lack
of analysis could also cause our stock price or trading volume to
decline.
S. There is no assurance that a public market will develop for our
stock, but, if a market develops, the stock will likely be subject to
the "penny stock" rules.
We make no assurance that a public market will ever develop for our
common stock. However, if a trading market develops, it is likely that
transactions in our common stock will be subject to the Commission's
"penny stock" rules and, as a result, any trading activity in our
common stock may be materially adversely affected and broker-dealers
may experience difficulty in completing customer transactions. Because
our common stock will not be listed on a nationally approved exchange
or the NASDAQ, we will not meet certain minimum financing requirements
and the bid price, if any, for our common stock will be less than $5.00
per share, it will likely be considered penny stock within the meaning
of Rule 3a-51-1 of the Securities Exchange Act of 1934. The Securities
and Exchange Commission regulates broker-dealer practices in connection
with transactions in penny stocks. Further, penny stocks often suffer
wide fluctuations in price and have certain disclosure requirements
that make resale in the secondary market difficult, if not impossible.
This would adversely affect your ability to sell the shares in any
trading market that may develop. Rules associated with transactions in
penny stocks include the following:
- The delivery of a standardized risk disclosure document;
- The provision of other information, such as current bid and offer
quotations, the compensation to be provided to broker-dealers and
salespersons and monthly accounting for penny stocks held in the
customer's account;
- Written determination that the penny stock is a suitable
investment for the purchaser; and
- Written agreement to the transaction by the purchaser.
Because our common stock will likely be subject to these rules in the
event that a trading market develops, broker-dealers may find it
difficult to effectuate customer transactions and trading activity in
our shares may be materially adversely affected. As a result, the
market price of our common stock may be materially depressed and you
may find it more difficult to sell the shares.
T. All of our present shareholders may be selling their shares and the
selling of these shares could have a very adverse effect on the price
of our stock.
22
If, a market eventually develops for our shares via the Pink Sheets or
the OTC Bulletin Board, the shareholders may offer and sell the shares
from time to time in each case at prices then prevailing in the public
market at the time of sale, at prices related to these prevailing
market prices or at negotiated prices, in open market transactions, in
private or negotiated transactions or in a combination of these methods
of sale. As a result, the price, if any, for the stock may fall.
Because of the provisions of Rule 144, all restricted stock is
currently available for sale in a public market, if one develops. The
availability for sale of substantial amounts of stock under Rule 144
could reduce prevailing prices for our common stock. Because we have a
limited number of shares of our common stock issued and outstanding,
sales of any significant number of shares into the market would depress
the share price and the price may not appreciate thereafter.
U. Preferred stock may be issued that may have preferences over our
common stock and may cause additional dilution. Preferred stock can be
issued with a board of directors' resolution.
We are authorized to issue 5,000,000 shares of preferred stock, which,
if issued, may reduce the price of our common stock. Although no
preferred stock is currently issued or outstanding, our directors are
authorized by our articles of incorporation to issue preferred stock in
series without the consent of our shareholders. Our preferred stock,
if and when issued, may rank senior to our common stock with respect to
payment of dividends and amounts received by shareholders upon
liquidation, dissolution or winding up. The issuance of preferred
stock in series and the preferences given the preferred stock must be
by a resolution of directors, but we do not need the approval of our
shareholders. The existence of rights, which are senior to our common
stock, may reduce the price of our common stock.
V. We have no audit, disclosure or compensation committee and our
shareholders must rely on the actions of our directors.
We do not have an audit, disclosure or compensation committee comprised
of independent directors. Accordingly, the board of directors as a
whole must perform the functions of audit, disclosure and compensation
committee members. Our board of directors is presently comprised of
one member, who is not independent. Thus, there is a potential
conflict in that our directors, who are also executive officers, will
determine management compensation and audit and disclosure issues that
may affect management decisions.
W. Community Alliance will be subject to reporting requirements of the
SEC that can be costly and time consuming.
With the filing of this Form 10, Community Alliance becomes a
"Reporting Company" and as such, we will be subject to the information
and reporting requirements of the Securities Exchange Act of 1934 and,
accordingly, we will be obligated to file a Form 10-K with audited
financial statements annually, a Form 10-Q with unaudited financial
statements quarterly and other reports with the Securities and Exchange
Commission that are both costly and time consuming. These filings will
place additional burdens on us, both financially and with regard to the
demands on the time of our executive officers. If we cease filing
23
these reports, and in the event that our stock ever becomes trading on
the OTCBB, our common stock would no longer be eligible for quotation
on the Over-the-Counter Bulletin Board, which could reduce the value
and liquidity of your investment in our shares. If we are not required
under Section 12(g) or otherwise to be a mandatory Exchange Act filer
because of the fact that we have less than 500 shareholders, we intend
to continue as a voluntary reporting company, although we would not be
subject to the proxy statement or other information requirements of the
Securities Exchange Act.
In the event that we are unable to establish a base of operations that
generates sufficient cash flow or we are unsuccessful in obtaining
additional equity or debt financing, the costs of maintaining our
status as a reporting entity may inhibit out ability to continue our
operations. If we subsequently decide to cease filing reports, our
securities could no longer be quoted on the Over-the-Counter Bulletin
Board. This could reduce the value and liquidity of your investment in
our shares.
ITEM 2. FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Trends and Uncertainties
Demand for our products and services are dependent on, among other
things, general economic conditions which are cyclical in nature.
Inasmuch as a major portion of our activities are the receipt of
revenues from the sale of sub-licenses to market the custom school
take-home folder product, our business operations may be adversely
affected by our competitors and prolonged recessionary periods. Also,
due to the fact that we have sold only four sub-licenses as of October
31, 2008, and that only one of these sublicenses has been successful in
signing up schools, there now may be a question as to how successful
Community Alliance will be in generating revenues, both from the sale
of sub-licenses and the production of the products.
There are no material commitments for capital expenditure at this time.
There are no significant elements of income or loss that arise from our
continuing operations. There are no known causes for any material
changes from period to period in one or more line items of the
corporation's financial statements.
Capital and Source of Liquidity
We have no material commitments for capital expenditures. We have no
plans for future capital expenditures at this time.
We now have the license for the major part of the State of Colorado,
which is a going business and generating revenues. As a result, we
believe there will be sufficient capital from revenues to conduct
operations for the next twelve months. The Colorado operation has been
generating from between $70,000 to $100,000 in annual revenues.
24
Community Alliance presently has very little expenses, except for legal
and accounting which are associated with being a public company.
Community Alliance pays no salaries and only pays commissions on sales.
Community Alliance does not pay rent or other expenses for offices at
this time.
We are planning on commencing the sale of sub-licenses in the first
quarter on 2009.
We cannot guarantee that short term cash needs will be met through
operations. If additional capital is needed, the president of
Community Alliance is prepared to supply additional capital on a loan
basis.
Future revenues from the sale of sub-licenses and from the Colorado
operations, will determine the amount of additional financing necessary
to continue operations.
The board of directors has no immediate offering plans in place. The
board of directors shall determine the amount and type of financing as
our financial situation dictates.
For the nine months ended August 31, 2008 and 2007, Community Alliance
did not pursue any investing activities.
For the nine months ended August 31, 2008, Community Alliance made
payments on notes payable of $3,500 and had amounts due to parent
company of $20,200. As a result, Community Alliance had net cash used
in financing activities of $16,700 for the nine months ended August 31,
2008.
24
Comparatively, for the nine months ended August 31, 2007, Community
Alliance had amounts due to parent company of $9,200. As a result,
Community Alliance had net cash used in financing activities of $9,200
for the nine months ended August 31, 2007.
On a long term basis, liquidity is dependent on continuation of
operation and receipt of revenues.
Results of Operations
Nine Months Ended August 31, 2008 Compared to Nine Months Ended August
31, 2007
Revenues were $5,991 for the nine months ended August 31, 2007 compared
to $21,314 for the nine months ended August 31, 2008. Costs of goods
sold for the nine months ended August 31, 2007 were $8,200 compared to
$13,810 for the nine months ended August 31, 2008. Revenues increased
primarily due to an increase in publications fees from $1,851 for the
nine months ended August 31, 2007 to $18,969 for the nine months ended
August 31, 2008. This increase was primarily due to taking over the
Colorado operation.
Operating expenses increased from $10,190 for the nine months ended
August 31, 2007 to $31,367 for the nine months ended August 31, 2008.
The increase in these expenses was due primarily to increased
amortization expense of $12,000 for the nine months ended August 31,
2008 compared to $4,500 for the same period in 2008 from additional
licensing agreements and other licensing expenses such as commissions
of $5,789 for the nine months ended August 31, 2008.
Community Alliance had net loss of $(12,399) for the nine months ended
August 31, 2007 compared to $(23,863) for the nine months ended August
31, 2008. The increase in net loss was primarily due to the increased
licensing expense and amortization as described above.
Year Ended November 30, 2007 Compared to Year Ended November 30, 2007
Revenues were $6,006 for the year ended November 30, 2007 compared to
$16,100 for the year ended November 30, 2006. Costs of goods sold for
the year ended November 30, 2007 were $8,200 compared to $10,000 for
the year ended November 30, 2006. Revenues decreased primarily due to
the sale of four sub-licenses in 2006 and related expenses and no sales
in 2007.
Operating expenses decreased from $15,250 for the year ended November
30, 2006 to $7,540 for the year ended November 30, 2008. The decrease
in these expenses was due primarily to a reduction in general and
administrative expenses from $9,250 in 2006 to $1,540 in 2007 as Ruth
Daily less time pursing Community Alliance business and concentrated on
business in Jefferson County, Colorado.
Community Alliance had net loss of $(9,734) for the year ended November
30, 2007 compared to $(9,150) for the year ended November 30, 2006.
26
If we are unable to increase our sales of sub-licenses to generate
revenue or raise additional capital from debt or equity financing, we
may be forced to curtail or cease our operations. Even if we are able
to continue our operations, the failure to obtain financing could have
a substantial adverse effect on our business and financial results. We
have no commitment from our officers and directors or any of our
shareholders to fund our operations or provide us with financing in the
future.
In the future, we may be required to seek additional capital by selling
debt or equity securities, selling assets, or otherwise maintaining
cash flows in balance when they approach a condition of cash
insufficiency. The sale of additional equity securities, if
accomplished, may result in dilution to our shareholders. We cannot
assure you that financing will be available in amounts or on terms
acceptable to us, or at all.
Critical Accounting Policies
Our discussion and analysis of results of operations and financial
condition are based upon our financial statements, which have been
prepared in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial
statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We base our
estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
We considered the quality and variability of information regarding the
financial condition and operating performance that may have changed in
the past and may change in the future that may have a material effect,
and have quantified them where possible. Specifically, we considered
risk of variability with changes in contract that may affect the
recognition of income and also the possibility of changes in the tax
code that may affect the long term rates of return.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Burden of SEC Reporting Requirements
We have chosen to become a "reporting company" and hereafter we will be
subject to the information and reporting requirements of the Securities
Exchange Act of 1934.
Accordingly, we will be obligated to file a Form 10-K with audited
financial statements annually, a Form 10-Q with unaudited financial
statements quarterly and other reports with the Securities and Exchange
Commission that are both costly and time consuming. These filings will
place additional burdens on us, both financially and with regard to the
27
demands on the time of our executive officers. If we cease filing
these reports, our common stock would no longer be eligible for
quotation on the Over-the-Counter Bulletin Board, which could reduce
the value and liquidity of your investment in our shares. If we are
not required under Section 12(g) or otherwise to be a mandatory
Exchange Act filer because of the fact that we have less than 500
shareholders, we intend to continue as a voluntary reporting company,
although we would not be subject to the proxy statement or other
information requirements of the Securities Exchange Act. In the event
that we are unable to establish a base of operations that generates
sufficient cash flow or we are unsuccessful in obtaining additional
equity or debt financing, the costs of maintaining our status as a
reporting entity may inhibit out ability to continue our operations.
If we subsequently decide to cease filing reports, our securities could
no longer be quoted on the Over-the-Counter Bulletin Board. This could
reduce the value and liquidity of your investment in our shares.
Controls and Procedures
During the three months ended August 31, 2008, there were no changes in
our internal controls over financial reporting (as defined in Rule 13a-
15(f) and 15d-15(f) under the Exchange Act) that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
28
Evaluation of Disclosure Controls and Procedures
Phillip E. Ray, the chief executive officer a director and A. Terry
Ray, a director and secretary of Community Alliance have made an
evaluation of the disclosure controls and procedures relating to the
financial statements for the three months ended August 31, 2008 and
have concluded such controls and procedures to be effective as of
August 31, 2008 to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Act is
recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms and to ensure that
information required to be disclosed by an issuer in the reports that
it files or submits under the Act is accumulated and communicated to
the issuer's management, including its principal executive and
principal financial officers, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure.
ITEM 3. PROPERTIES.
Community Alliance is currently housed in the home of our president.
We do not pay our president for use of such space. We anticipate that
we will rent separate office facilities when needed to support the
growth of our business. We do not currently anticipate the need for
warehouse space for our business. We expect all warehouse and shipping
of our products to be conducted by the packing firms engaged to
manufacture our products.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our shares of common stock to be distributed to Fresh Ideas
shareholders of record as of September 9, 2008 are being held in escrow
with Jody M. Walker, Attorney At Law until this Form 10 is effective.
The following tabulates holdings of shares of Community Alliance by
each person who, adjusted for completion of the spin-off, will be
holders of record or is known by management to own beneficially more
than 5.0% of the common stock and, in addition, by all directors and
officers of Community Alliance individually and as a group. Each named
beneficial owner has sole voting and investment power with respect to
the shares set forth opposite his name.
Shareholdings at September 9, 2008
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Stock
<s> <c> <c>
Fresh Ideas Media, Inc. 7,535,000 100.0%
4980 Silver Pine Drive
Castle Rock, CO 80108
Phillip E. Ray 0 0.0%
4980 Silver Pine Drive
Castle Rock, CO 80108
29
Ruth Daily 0 0.0%
4980 Silver Pine Drive
Castle Rock, CO 80108
A. Terry Ray(2) 0 0.0%
4980 Silver Pine Drive
Castle Rock, CO 80108
All directors and officers
as a group 3 persons) 0 0.00%
Shareholdings at September 9, 2008
Adjusted for completion of the spin-off(1)
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Stock
<s> <c> <c>
Phillip E. Ray(2) 1,500,000(direct) 19.9%
4980 Silver Pine Drive 550,000(indirect) 7.3%
Castle Rock, CO 80108
Ruth Daily 1,500,000 19.9%
4980 Silver Pine Drive
Castle Rock, CO 80108
A. Terry Ray(3) 2,050,000(indirect) 27.2%
4980 Silver Pine Drive
Castle Rock, CO 80108
All directors and officers
as a group 3 persons) 3,000,000 39.8%
550,000 7.3%
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
(2)Phillip E. Ray is the beneficial owner of 2,050,000 shares of our
common stock through his direct ownership of 1,500,000 shares of our
common stock and through his positions as the sole officer, director
and shareholder of American Business Services, Inc., which owns 250,000
shares of our common stock, and the majority shareholder and sole
officer and director of VentureVest Capital Corporation, which owns
300,000 shares of our common stock.
(3)A. Terry Ray is the beneficial owner of the 2,050,000 shares of our
common stock directly and indirectly held by her spouse, Phillip E.
Ray.
30
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
The spin-off of Community Alliance's shares to the shareholders to its
parent, Fresh Ideas will not result in Bright Praise becoming a
shareholder of Community Alliance.
Current Shareholdings in Fresh Ideas. Phillip E. Ray is the beneficial
owner of 552,500 shares of Fresh Ideas common stock through his direct
ownership of 2,500 shares of Fresh Ideas common stock and through his
positions as the sole officer, director and shareholder of American
Business Services, Inc., which owns 250,000 shares of Fresh Ideas
common stock, and the majority shareholder and sole officer and
director of VentureVest Capital Corporation, which owns 300,000 shares
of Fresh Ideas common stock.
A. Terry Ray is the beneficial owner of the 552,500 shares of Fresh Ideas
common stock directly and indirectly held by her spouse, Phillip E. Ray.
Ruth Daily is the beneficial owner of 632,500 common shares of Fresh
Ideas.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name Position Held Term of Office
<s> <c> <c>
Phillip E. Ray, age 70 President, CEO Inception to
Director present
A. Terry Ray, age 63 Secretary, Director June 2007 to
present
Ruth Daily, age 48 Director, Treasurer February 2008 to
present
Resumes
Phillip E. Ray
Mr. Ray has had experience in the management of public and non-public
companies, including developing national marketing programs,
advertising and publications, product development, investor relations,
public securities offerings, corporate development, business plan
preparation, financing strategies for developing companies and many
other areas of corporate development and management. Mr. Ray has
served as the President, a director and a major shareholder of two
Denver, Colorado-based companies, since he founded the businesses in
1997. VentureVest Capital and American Business Services are engaged
in business consulting in the areas of advertising, marketing, mergers
and acquisitions and strategic planning, primarily, for companies
preparing for an initial public securities offering or a private
securities placement.
31
Mr. Ray was Assistant Manager of Howlett Distributing in Las Vegas,
Nevada, prior to founding his own advertising business in 1958. From
1958 until 1971, he served as owner and President of Advertising
Productions of Nevada, Inc., an advertising service, and Phil E. Ray &
Associates, a full-service advertising agency. Mr. Ray relocated to
Colorado in 1971. In 1972, he founded and served as President and
Chairman of the Board of Director of Electromedics, Inc., a Colorado
corporation specializing in medical products. Electromedics became a
public company in 1974 through an initial public securities offering.
Electromedics developed into a company with diversified medical,
industrial and consumer products. Mr. Ray acquired the consumer
products division of Electromedics in 1981, organized a new company and
eventually merged that company with a public company to spend full time
in business consulting and other ventures, including VentureVest
Capital and American Business Services.
Alice Terry Ray
Ms. Ray is the wife of Phillip Ray, the president for Community
Alliance, and has served as the corporate secretary of a number of
public and private corporations and the administrative assistant or
secretary to presidents of several companies for many years. Since
1993, she has served as the Secretary of American Business Services,
one of the business consulting companies owned by Mr. Ray. From 1995
to January 2004, she was employed as a senior administrator for Denver
Reserve, Inc., a company in Littleton, Colorado, engaged in pre-tax
benefit plans. Ms. Ray currently serves as President of a literary
guild and she has served in various administrative positions in her
community for many years. Ms. Ray attended the University of Nevada-
Las Vegas, majoring in business administration, from 1963 to 1965.
Ruth Daily
Ms. Daily manages Venitech, LLC, a Denver, Colorado-based advertising
and business consulting firm that she founded in 1999. Through Ms.
Daily's efforts, Venitech developed the Community Alliance Custom Take-
Home Folder program under the trade name of Community Alliance of
Colorado in October of 2002. Community alliance of Colorado has signed
up 38 schools in Colorado and is generating between $70,000 and
$100,000 in revenue. In February of 2008, Venitech entered into a
Licensing Agreement with Community Alliance, Inc., the wholly owned
subsidiary of Fresh Ideas Media, Inc, and for a fee, granting a license
to Community Alliance, Inc. for the State of Colorado, and in so doing
assigned over to Community Alliance, Inc. all of the schools that was
under contract in Colorado, and the revenue generated from the sales of
advertising from the school folders.
Ms. Daily has agreed to continue to contract with schools and to sell
advertising for the school folders in Colorado and to do so on a
commission only basis.
32
Director Independence
Community Alliance presently has three directors. Mr. Ray is the
President and CEO of Community Alliance, A. Terry Ray is the Secretary
of Community Alliance and Ruth Daily is the Treasurer of Community
Alliance and none of the three are therefore considered to be
independent.
Audit Committee
Our board of directors has been responsible for the Audit Committee
function. As such, under the definition of "independence" as set forth
in NASDAQ Marketplace Rule 4350, we do not have a fully independent
audit committee. As our common stock is not publicly traded nor listed
on or with a national securities exchange or national securities
association, we are not required to have a fully independent audit
committee. In addition, we do not have a designated audit committee
financial expert.
Our board of directors have not designated a separate compensation or
nominating committee.
Term of Office
Our officers are elected annually by the board of directors and may be
replaced or removed by the board at any time. Our directors are
elected by our shareholders annually and serve until the election and
qualification of their successors or their earlier resignation or
removal.
Code of Ethics
We have adopted a Code of Ethics for our Senior Financial Officers. We
shall, without charge, provide to any person, upon request, a copy of
our Code of Ethics for our Senior Financial Officers. All such
requests should be mailed to: Community Alliance, Inc., 4980 Silver
Pine Drive, Castle Rock, CO 80108.
ITEM 6. EXECUTIVE COMPENSATION
Executive Employment Contracts. Our named executive officers serve "at
will" with no written employment agreements. They do not currently
receive any compensation for such services.
Equity Compensation Plan Information. We currently do not have any
equity compensation plans outstanding.
Director Compensation
Members of the board of directors may receive an amount yet to be
determined annually for their participation and will be required to
attend a minimum of four meetings per fiscal year. To date, Community
Alliance has paid $0.00 in directors' expenses.
33
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Spin-off from Predecessor
On September 9, 2008, the Board of Directors of Fresh Ideas approved
the spin-off of Community Alliance to its shareholders. The spin-off
is being done in connection the Share Exchange. Under the terms of the
spin-off, shares our common stock will be distributed on a pro-rata
basis to each holder of Fresh Ideas' common stock on the record date
without any consideration or action on the part of such holders, and
the holders of Fresh Ideas' common stock as of the record date will
become owners of 100 percent of our common stock. The spin-off will be
consummated only upon (a) the consummation of the Share Exchange, and
(b) the satisfactory resolution of all comments from the SEC to this
Form 10 and this Form 10's effectiveness. The shares of our common
stock to be distributed to the former shareholders of Fresh Ideas as of
the record date are being held in escrow with Jody M. Walker, Attorney
At Law. Fresh Ideas is the
34
predecessor of Community Alliance. However, there is no assurance at
this time that the Share Exchange will be consummated, and therefore no
assurance that the spin-off will be consummated.
Phillip E. Ray, Alice Terry Ray and Ruth Daily were officers, directors
and principal shareholders of Fresh Ideas through the closing date of
the Share Exchange.
There will be no other agreements between Ever Auspicious or its sole
shareholder, Bright Praise and Community Alliance after the spin-off.
Neither Fresh Ideas, Bright Praise, nor Ever Auspicious will retain any
liability relating to Community Alliance or Our Best Wishes after the
spin-off. In connection with the spin-off and the Share Exchange,
Community Alliance will assume all of the indebtedness of Fresh Ideas
prior to the closing date of the Share Exchange.
Alice T. Ray is the wife of Phillip E. Ray, an officer and director of
the Company.
Since the inception of the Community Alliance, and at various times,
other companies owned by Mr. Ray have loaned money to Community
Alliance on an as needed basis. For some of the money loaned,
promissory notes were issued and interest paid. Other loans were short
term and no Promissory notes were generated. As of August 31, 2008,
all loans had been repaid.
On February 6, 2008, Fresh Ideas entered into a License Agreement with
Venitech, LLC for the School Folders in the State of Colorado, with the
exception of Jefferson County in that state. Venetich, LLC had been
operating the School Folder business in the state of Colorado for a
number of years and has 38 schools under contract for the school
folders. Ruth Daily, the president of Venitech, LLC, was a major
shareholder of Fresh Ideas Media, having owned 19.9 % of Fresh Ideas,
and as soon as the spin-out of Community Alliance, Inc., the wholly
owned subsidiary, is completed, Ms. Daily will be a major shareholder
of Community Alliance, Inc. On February 4, 2008, Ms. Daily was elected
to the Board of Directors and appointed as Treasurer of Community
Alliance.
ITEM 8. LEGAL PROCEEDINGS
Community Alliance is not a party to any legal proceedings nor is
Community Alliance aware of any disputes that may result in legal
proceedings.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is not included in the pink sheets nor in the OTC
Bulletin Board maintained by the NASD.
35
There is no public trading market for our common stock and there is no
guarantee any trading market will develop.
None of our common equity is subject to outstanding options or warrants
to purchase, or securities convertible into, common equity.
As of October 31, 2008, there are 1,507,000 shares of our common stock
outstanding. These common shares are restricted within the meaning of
Rule 144 under the Securities Act, and are subject to the resale
provisions of Rule 144.
None of our common equity is being, or has been publicly proposed to
be, publicly offered.
Holders
The sole shareholder of record of our common stock is Fresh Ideas
Media, Inc. These shares are being held in escrow until completion of
the spin-off. As a result of the spin-off, the approximate number of
record holders of Community Alliance will be 52.
Dividends
Holders of our common stock are entitled to receive such dividends as
may be declared by its board of directors after the spin-off has been
completed. Community Alliance does not anticipate that it will declare
any dividends. All profit will be used for continuing operations.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On March 24, 2005, 100 shares of our common stock were issued to Fresh
Ideas Media, Inc., the parent company for $.001 per common share.
These shares of common stock were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1934 to a
sophisticated investor. On August 13, 2008, Community Alliance
effectuated a forward stock split increasing our issued and outstanding
common stock from 100 to 1,507,000 shares.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The following statements constitute brief summaries of Community
Alliance's Certificate of Incorporation and Bylaws, as amended.
Common Stock
Our articles of incorporation authorize us to issue up to 95,000,000
shares of common stock, $.001 par value per share. As of the
completion of the spin-off, there will 7,535,000 shares of common stock
issued and outstanding.
Community Alliance is authorized to issue up to 5,000,000 preferred
shares. As of the completion of the spin-off there will be no
preferred shares issued and outstanding.
36
Liquidation Rights
Upon liquidation or dissolution, each outstanding common share will be
entitled to share equally in the assets of Community Alliance legally
available for distribution to shareholders after the payment of all
debts and other liabilities.
Dividend Rights
There are no limitations or restrictions upon the rights of the board
of directors to declare dividends out of any funds legally available
therefore. Community Alliance has not paid dividends to date and it is
not anticipated that any dividends will be paid in the foreseeable
future. The board of directors initially may follow a policy of
retaining earnings, if any, to finance the future growth of Community
Alliance. Accordingly, future dividends, if any, will depend upon,
among other considerations, Community Alliance's need for working
capital and its financial conditions at the time.
Voting Rights
Holders of our common stock are entitled to voting rights of one
hundred percent. Holders may cast one vote for each share held at all
shareholders meetings for all purposes.
Other Rights
Shares of our common stock are not redeemable, have no conversion
rights and carry no preemptive or other rights to subscribe to or
purchase additional shares of our common stock in the event of a
subsequent offering.
Our bylaws allow action to be taken by written consent rather than at a
meeting of stockholders with the consent of the holders of a majority
of shares entitled to vote.
Transfer Agent
Upon completion of the registration statement, Mountain Share Transfer
will act as Community Alliance's transfer agent.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Community Alliance shall indemnify to the fullest extent permitted by,
and in the manner permissible under the laws of the State of Nevada,
any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he is or was a director or officer of
Community Alliance, or served any other enterprise as director, officer
or employee at the request of Community Alliance. The board of
directors, in its discretion, shall have the power on behalf of
Community Alliance to indemnify any person, other than a director or
officer, made a party to any action, suit or proceeding by reason of
the fact that he/she is or was an employee of Community Alliance.
37
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of Community
Alliance, Community Alliance has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Community Alliance of expenses incurred or
paid by a director, officer or controlling person of Community Alliance
in the successful defense of any action, suit or proceedings) is
asserted by such director, officer, or controlling person in connection
with any securities being registered, Community Alliance will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements for the fiscal years ended
November 30, 2007 and 2006 have been examined to the extent indicated
in their report by Ronald R. Chadwick, P.C., independent certified
public accountants. The financial statements have been prepared in
accordance with generally accepted accounting principles, pursuant to
Regulation S-X as promulgated by the SEC, and are included herein in
response to Item 13 of this Form 10. The unaudited financial
statements for the nine month period ended August 31, 2008 have been
prepared by Community Alliance.
ITEM 14. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Since inception, there have been no changes in or disagreements with
Community Alliance's principal independent accountant.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements required by Item 310 of
Regulation S-K are furnished below:
Report of Ronald R. Chadwick, P.C.
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
38
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
Board of Directors
Community Alliance, Inc.
Castle Rock, Colorado
I have audited the accompanying consolidated balance sheets of
Community Alliance, Inc. (a development stage company) as of November
30, 2006 and 2007, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years then
ended, and for the period from inception of the development stage
(February 22, 2005) through November 30, 2007. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements
based on my audit.
I conducted my audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that I plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. I believe
that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Community Alliance, Inc. at November 30, 2006 and 2007,
and the consolidated results of its operations and its cash flows for
the years then ended, and for the period from inception of the
development stage (February 22, 2005) through November 30, 2007 in
conformity with accounting principles generally accepted in the United
States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has
suffered recurring losses from operations and has had a working capital
deficit and stockholders' deficit. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Aurora, Colorado /s/Ronald R. Chadwick, P.C.
---------------------------
November 20, 2008 RONALD R. CHADWICK, P.C.
39
COMMUNITY ALLIANCE, INC.
(A Development Stage Company)
BALANCE SHEETS
August 31,
Nov. 30, Nov. 30, 2008
2006 2007 (Unaudited)
-------- -------- ---------
<s> <c> <c> <c>
ASSETS
Current assets
Cash $ 534 $ 1,118 $ 710
Sub-license accounts receivable - current 1,000 2,000 -
Deferred license expense - current 6,000 6,000 4,000
-------- -------- --------
Total current assets 7,534 9,118 4,710
-------- -------- --------
Sub-license accounts receivable 12,000 6,000 -
Due from parent company 925 - -
Deferred license expense 14,654 8,654 18,654
-------- -------- --------
27,579 14,654 18,654
-------- -------- --------
Total Assets $ 35,113 $ 23,772 $ 23,364
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,525 $ 2,525 $ 2,525
Related party payables - - 9,950
License account payable-related party 6,500 2,000 35,050
Customer deposits - - 2,596
Notes payable-related party 3,500 - -
Accrued interest payable 102 - -
Due to parent company - 14,975 5,775
Unearned revenue - current 6,000 4,000 2,500
-------- -------- --------
18,627 23,500 57,146
Total current liabilities -------- -------- --------
Unearned revenue 17,166 10,686 1,841
-------- -------- --------
Total Liabilities 35,793 34,186 57,641
-------- -------- --------
Stockholders' Equity
Preferred stock, $.001 par value;
5,000,000 shares authorized;
none issued and outstanding - - -
Common stock, $.001 par value;
95,000,000 shares authorized;
1,507,000 shares issued and outstanding 1,507 1,507 1,507
Additional paid in capital 28,493 28,493 28,493
Deficit accumulated during the
development stage (30,680) (40,414) (64,277)
-------- -------- --------
40
Total Stockholders' Equity (680) (10,414) (34,277)
-------- -------- --------
Total Liabilities and Stockholders' Equity $ 35,113 $ 23,772 $ 23,364
======== ======== ========
The accompanying notes are an integral part
of the financial statements.
41
COMMUNITY ALLIANCE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months
Ended
Year Ended Year Ended August 31, 2007
Nov. 30, 2006 Nov. 30, 2007 (Unaudited)
------------- ------------- -------------
<s> <c> <c> <c>
Sales $ 16,100 $ 6,006 $ 5,991
Cost of goods sold 10,000 8,200 8,200
--------- --------- ---------
Gross profit 6,100 (2,194) (2,209)
--------- --------- ---------
Operating expenses:
Amortized license 6,000 6,000 4,500
General and administrative 9,250 1,540 5,690
--------- --------- ---------
15,250 7,540 10,190
--------- --------- ---------
Gain (loss) from operations (9,150) (9,734) (12,399)
--------- --------- ---------
Other income (expense):
Interest expense (102) - -
--------- --------- ---------
(102) - -
--------- --------- ---------
Income (loss) before provision
for income taxes (9,252) (9,734) (12,399)
Provision for income tax - - -
--------- --------- ---------
Net income (loss) $ (9,252) $ (9,734) $ (12,399)
========= ========= =========
Net income (loss) per share
(Basic and fully diluted) $ (92.52) $ (97.34) $ (0.01)
========= ========= =========
Weighted average number of
common shares outstanding 1,507,000 1,507,000 1,507,000
========= ========= =========
(Continued On Following Page)
The accompanying notes are an integral part
of the financial statements
42
COMMUNITY ALLIANCE, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Continued From Previous Page)
Period From
Nine Months Feb. 22, 2005 (Inception)
Ended (Inception) Through
Aug. 31, 2008 Through Aug. 31, 2008
(Unaudited) Nov. 30, 2007 (Unaudited)
------------ -------------- ------------
<s> <c> <c> <c>
Sales $ 21,314 $ 31,140 $ 52,454
Cost of goods sold 13,810 18,200 32,010
-------- -------- --------
Gross profit 7,504 12,940 20,444
-------- -------- --------
Operating expenses:
Amortized license 12,000 15,571 27,571
General and administrative 19,367 37,681 57,048
-------- -------- --------
31,367 53,252 84,619
-------- -------- --------
Gain (loss) from operations (23,863) (40,312) (64,175)
-------- -------- --------
Other income (expense)
Interest expense - (102) (102)
-------- -------- --------
- (102) (102)
-------- -------- --------
Income (loss) before provision
for income taxes (23,863) (40,414) (64,277)
Provision for income tax - - -
-------- -------- --------
Net income (loss) $(23,863) $(40,414) $(64,277)
======== ======== ========
Net income (loss) per share
(Basic and fully diluted) $ (0.02)
========
Weighted average number of
common shares outstanding 1,507,000
=========
The accompanying notes are an integral part
of the financial statements
43
COMMUNITY ALLIANCE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accum.
Common Stock During the Stock-
Amount Paid In Development holders'
Shares(1) ($.001 Par) Capital Stage Equity
------------------ ------- ----------- --------
<s> <c> <c> <c> <c> <c>
Balances at February
22, 2005 - $ - $ - $ - $ -
Stock issuance to parent
company for licensing 1,507,000 1,507 28,493 - 30,000
Net income (loss) for
the period - - - (21,428) (21,428)
--------- ------ ------- -------- --------
Balances at November
30, 2005 1,507,000 $1,507 $28,493 $(21,428) $ 8,572
Net income (loss)
for the period - - - (9,252) (9,252)
--------- ------ ------- -------- --------
Balances at November
30, 2006 1,507,000 $1,507 $28,493 $(30,680) $ (680)
Net income (loss)
for the period - - - (9,734) (9,734)
--------- ------ ------- -------- --------
Balances at November
30, 2007 1,507,000 $1,507 $28,493 $(40,414) $(10,414)
========= ====== ======= ======== ========
Net income (loss)
for the period - - - (23,863) (23,863)
--------- ------ ------- -------- --------
Balances at August 31, 2008
- unaudited 1,507,000 $1,507 $28,493 $(64,277) $(34,277)
========= ====== ======= ======== ========
(1)As restated for a 15,070 for 1 forward stock split on August 25, 2008
The accompanying notes are an integral part
of the financial statements.
44
COMMUNITY ALLIANCE
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Ended
Year Ended Year Ended Aug. 31, 2007
Nov. 30, 2006 Nov. 30, 2007 (Unaudited)
------------- ------------- -------------
<s> <c> <c> <c>
Cash Flows From Operating Activities:
Net income (loss) during the
development stage $ (9,252) $ (9,734) $ (12,399)
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Compensatory stock issuances - - -
Accounts receivable 2,500 5,000 (2,000)
Deferred expenses 5,775 6,000 4,500
Loan payable - related party (9,000) (4,500) (3,500)
Accrued interest payable 102 (102) (102)
Deferred revenues (6,000) (8,480) (1,991)
Customer deposits - - -
Accounts payable 2,525 - -
--------- --------- ---------
Net cash provided by (used for)
operating activities (13,350) (11,816) (15,492)
--------- --------- ---------
Cash Flows From Investing Activities:
- - -
Net cash provided by (used for)
investing activities - - -
Cash Flows From Financing Activities:
Notes payable - borrowings 3,500 - -
Notes payable - payments - (3,500) (3,500)
Due from/to parent company 7,724 15,900 14,975
-------- -------- --------
Net cash provided by (used for)
financing activities 11,224 12,400 14,975
-------- -------- --------
Net Increase (Decrease) In Cash (2,126) 584 1,118
Cash At The Beginning Of The Period 2,660 534 -
-------- -------- --------
Cash At The End Of The Period $ 534 $ 1,118 $ 1,118
======== ======== ========
45
Schedule Of Non-Cash Investing And Financing Activities
- -------------------------------------------------------
In 2005, the Company issued its parent company 1,507,000 common shares for
a license recorded at $30,000.
Nine Months
Ended
Year Ended Year Ended Aug. 31, 2007
Nov. 30, 2006 Nov. 30, 2007 (Unaudited)
------------- ------------- -------------
<s> <c> <c> <c>
Supplemental Disclosure
Cash paid for interest $ - $ 102 $ 102
Cash paid for income taxes $ - $ - $ -
The accompanying notes are an integral part
of the financial statements
46
COMMUNITY ALLIANCE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued)
Feb. 18, 2005
Nine Months Feb. 22, 2005 (Inception)
Ended (Inception) Through
Aug. 31, 2008 Through Aug. 31, 2008
(Unaudited) Nov. 30, 2007 (Unaudited)
------------- ------------- -------------
<s> <c> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) during the
development stage $(23,863) $(40,414) $(64,277)
Adjustments to reconcile net loss to
Net cash provided by (used for)
operating activities:
Compensatory stock issuances - 30,000 30,000
Accounts receivable 8,000 (8,000) -
Deferred expenses (8,000) (14,654) (22,654)
Loan payable -related party 43,000 2,000 45,000
Accrued interest payable - - -
Deferred revenues (10,345) 14,686 4,341
Customer deposits - - -
Accounts payable - 2,525 2,525
-------- -------- --------
Net cash provided by (used for)
operating activities 8,792 (13,857) (5,065)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by (used for)
investing activities - - -
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable - borrowings - 3,500 3,500
Notes payable - payments - (3,500) (3,500)
Due from/to parent company (9,200) 14,975 5,775
-------- -------- --------
Net cash provided by (used for)
financing activities (9,200) 14,975 5,775
-------- -------- --------
Net Increase (Decrease) In Cash (408) 1,118 710
Cash At The Beginning Of The Period 1,118 - -
-------- -------- --------
Cash At The End Of The Period $ 710 $ 1,118 $ 710
======== ======== ========
(Continued On Following Page)
47
COMMUNITY ALLIANCE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued From Previous Page)
Feb. 18, 2005
Nine Months Feb. 22, 2005 (Inception)
Ended (Inception) Through
Aug. 31, 2008 Through Aug. 31, 2008
(Unaudited) Nov. 30, 2007 (Unaudited)
------------- ------------- -------------
<s> <c> <c> <c>
Schedule of Non-Cash Investing And Financing Activities
- -------------------------------------------------------
In 2005, the company issued its parent company 100
common shares for a license recorded at $30,000
Supplemental Disclosure
- -----------------------
Cash paid for interest $ 2,227 $ 102 $ 102
Cash paid for income taxes $ - $ - $ -
The accompanying notes are an integral part
of the financial statements
48
Community Alliance, Inc. and Subsidiary
(A Developmental Stage Enterprise)
Notes to Consolidated Financial Statements
November 30, 2006 and 2007, and August 31, 2008 (Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
Community Alliance, Inc. (the "Company") was incorporated on February
22, 2005 in the State of Nevada. The Company is in the development
stage and its intent is to conduct business as an advertising and
consulting company. Community Alliance, Inc. currently markets sub-
licenses for take-home school folders.
The Company has chosen November 30 as a year end.
Basis of Presentation
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going
concern. The has Company incurred losses and has a working capital
deficit. These conditions raise substantial doubt as to the Company's
ability to continue as a going concern. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. These financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Community Alliance, Inc. and its wholly owned subsidiary. All
intercompany accounts and transactions have been eliminated in
consolidation.
Use of estimates
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles (GAAP) requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements. The Company bases its estimates on historical
experience, management expectations for future performance, and other
assumptions as appropriate. Key areas affected by estimates include the
assessment of the recoverability of long-lived assets, which is based
on such factors as estimated future cash flows. The Company re-
evaluates its estimates on an ongoing basis. Actual results may vary
from those estimates.
Cash and cash equivalents
All cash and short-term investments with original maturities of three
months or less are considered cash and cash equivalents, since they are
readily convertible to cash. These short-term investments are stated at
cost, which approximates fair value.
49
Community Alliance, Inc. and Subsidiary
(A Developmental Stage Enterprise)
Notes to Consolidated Financial Statements - (Continued)
November 30, 2006 and 2007, and August 31, 2008 (Unaudited)
Concentration of Credit Risk
The Company sells licenses to companies or individuals. In some cases
the licensee will pay cash for the full amount of the license fee and
in other cases the licensee will pay an amount down and pay the balance
over a period of time. The Company extends credit to the licensee
based on an evaluation of the customer's financial condition, generally
without collateral, other than the possibility of revoking the license
if the licensee does not make the payments on time. Exposure to
losses on receivables is principally dependent on each licensee's
financial condition. The Company will monitor its exposure for credit
losses and will maintain allowances for anticipated losses, as
required. Since the Company is in its early stage, it is too early to
tell what the percentage of payment of all licensees will be.
Property and equipment
The company has no property or equipment at this time.
Revenue Recognition
Revenues are recognized only when realized / realizable and earned, in
accordance with GAAP. Advertising revenues are recognized when the
underlying advertisements are published, defined as the issuer's on-
sale date.
The Company follows the guidance of the Securities and Exchange
Commission's Staff Accounting Bulletin 104 ("SAB 104") for revenue
recognition. SAB 104 provides guidance on applying accounting
principles generally accepted in the United States of America to
revenue recognition in financial statements and applies provisions
therein to the Company's sublicensing income and licensing expense
whereby the income and expense amounts are recognized as time passes in
accordance with the applicable contracts. The Company requires the sub-
licensees to pay a publication fee of $1,900 for each school project
that includes the creation of advertisements for the sponsors and the
production, printing, and delivery of the completed folders and
recognizes income when delivered and collections of amounts due can be
reasonably expected. In instances of small schools, the publication
fee may be reduced.
Advertising expenses
Advertising costs are expensed when incurred. No advertising was
conducted during the twelve months ended November 30, 2006 or 2007, or
during the nine months ended August 31, 2008.
50
Community Alliance, Inc. and Subsidiary
(A Developmental Stage Enterprise)
Notes to Consolidated Financial Statements - (Continued)
November 30, 2006 and 2007, and August 31, 2008 (Unaudited)
Income taxes
Income taxes are accounted for in accordance with SFAS 109, Accounting
for Income Taxes, using the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company is currently
filing its income tax returns on the cash basis.
Earnings (loss) per share
Basic earnings per share are computed using the weighted average number
of actual common shares outstanding during the period. Diluted
earnings per share reflects the potential dilution that would occur
from the exercise of the conversion options of the debentures.
Note 2 - Development Stage Company
Based upon the Company's business plan, it is a development stage
enterprise. The Company is currently devoting most of its efforts
toward raising capital, developing business and marketing strategies,
and seeking territorial sub-licenses.
Accordingly, the Company presents its financial statements in
conformity with the accounting principles generally accepted in the
United States of America that apply in establishing operating
enterprises. As a development stage enterprise, the Company discloses
the income accumulated during the development stage and the cumulative
statements of operations and cash flows from inception to the current
balance sheet date.
Note 3 - Related Party Transactions
At November 30, 2006 the Company had notes payable to a corporation
controlled by an officer of $3,500. The notes bore interest at 5% per
annum. Interest expense under the notes in fiscal year 2006 was $102.
The notes were retired in full in fiscal year 2007.
Note 4 - Commitments
Currently the Company's office space is provided by the President at no
charge. In the future the Company intends to lease office space as
needed.
50
Community Alliance, Inc. and Subsidiary
(A Developmental Stage Enterprise)
Notes to Consolidated Financial Statements - (Continued)
November 30, 2006 and 2007, and August 31, 2008 (Unaudited)
Note 5 - Segment Information
Community Alliance, Inc. has determined that it has one reportable
segment, the sale of licenses for the Community Alliance business
model.
Note 6 - Income Taxes
Deferred income taxes arise from the temporary differences between
financial statement and income tax recognition of net operating losses.
These loss carryovers are limited under the Internal Revenue Code
should a significant change in ownership occur.
At November 30, 2006 and 2007 the Company had net operating loss
carryforwards of approximately $30,000 and $40,000 which begin to
expire in 2025. The deferred tax asset of $6,000 and $8,000 created by
the net operating losses has been offset by a 100% valuation allowance.
The change in the valuation allowance in fiscal year 2006 and 2007 was
approximately $6,000 and $2,000.
52
(b) Exhibits
(3.1) Articles of Incorporation incorporated by reference to Form 10
filed September 10, 2008
(3.2) Bylaws incorporated by reference to Form 10 filed September 10,
2008
(4) Form of Common Stock Certificate incorporated by reference to
Form 10 filed September 10, 2008
(10.1) License Agreement dated February 2008 with Venitech, LLC
incorporated by reference to Form 10 filed September 10, 2008
(10.2) License Agreement dated March 2005 with Venitech, LLC
incorporated by reference to Form 10 filed September 10, 2008
(10.3) Assignment and Assumption Agreement dated March 26, 2008
incorporated by reference to Form 10 filed September 10, 2008
(10.4) Code of Ethics incorporated by reference to Form 10 filed
September 10, 2008
(10.5) Addendum to Licensing Agreement between Venitech, LLC and Fresh
Ideas Media, Inc. dated January 16, 2007
(10.6) Addendum to Licensing Agreement between Venitech, LLC and Fresh
Ideas Media, Inc. dated March 14, 2005 and the Addendum To Licensing
Agreement Dated January 16, 2007
(10.7) Addendum to Venitech License Agreement dated July 28, 2008
(10.8) CTN sublicense dated July 24, 2005
(10.9) Addendum to CTN sub-license dated March 24, 2006
(10.10) Cancellation of CTN sub-license
(10.11) Hagerty sub-license dated November 28, 2005
(10.12) Addendum to Hagerty sub-license dated May 26, 2006
(10.13) Addendum to Hagerty sub-license dated December 31, 2006
(10.14) Addendum to Hagerty sub-license dated July 3, 2008
(10.15) Frontier sub-license dated May 2, 2007
(10.16) Addendum to Frontier sublicense dated May 7, 2008
(21) List of Subsidiaries
(99) Share Exchange Agreement dated November 11, 2008
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Community Alliance, Inc.
Date: November 25, 2008 /s/ Phillip E. Ray
---------------------
By: Phillip E. Ray
President, Chief Executive Officer