FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALLIANCE RECOVERY CORPORATION
Name of small business issuer in its charter)
Delaware 4911 30-0077338
(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
#390-1285 N. Telegraph Road
Monroe, Michigan 48162-3368
(519) 671-0417
(Address, including zip code, and telephone number, including
area code,
of registrant's principal executive offices)
Peter Vaisler, CEO and President
#390-1285 N. Telegraph Road
Monroe, Michigan 48162-3368
(519) 671-0417
(Name, address and telephone number of agent for service)
Copies of communications to:
RICHARD I. ANSLOW, ESQ.
ANSLOW & JACLIN, LLP
195 ROUTE 9 SOUTH, SUITE 204
MANALAPAN, NEW JERSEY 07726
TELEPHONE NO.: (732) 409-1212
FACSIMILE NO.: (732) 577-1188
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to rule 434 check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
Tile of each Proposed Proposed
class of securities Amount to maximum offering maximum aggregate Amount of
to be registered be registered price per share offering price registration fee
Common Stock, par value, $0.01 per share (1) 4,169,156 $0.50 $2,084,578.00 $245.35
Common Stock, par value, $0.01 per share (2) 2,253,929 $0.50 $1,126,964.50 $132.64
Total 6,423,085 $3,211,542.50 $377.99
(1) Represents Selling Security Holders shares being sold to the public. The
price of $.50 per share is being estimated solely for the purpose of computing
the registration fee pursuant to Rule 457(c) of the Securities Act and is based
on the share price paid by the Selling Security Holders for the purchase of the
shares.
(2) Represents shares of common stock issuable in connection with the conversion
of warrants to be issued to the Selling Security Holders. The price of $0.50 is
being estimated solely for the purpose of computing the registration fee
pursuant to Rule 457 (c) of the Securities Act and is based on the exercise
price of the warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED , 2004
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ALLIANCE RECOVERY CORPORATION
4,169,156 SELLING SECURITY HOLDER SHARES OF COMMON STOCK
2,253,929 SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH CONVERSION
OF WARRANTS
Our selling security holders are offering to sell 4,169,156 shares of our common
stock and 2,253,929 shares of our common stock issuable in connection with their
conversion of our warrants.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 5.
NEITHER THE SECURITES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is December , 2004
This prospectus relates to the resale by the selling stockholders of up to
4,169,156 shares of common stock and 2,253,929 shares of our common stock
issuable in connection with the conversion of our warrants. The selling
stockholders may sell the stock from time to time at the prevailing market price
or in negotiable transactions.
We will receive no proceeds from the sale of the shares by the selling
stockholders. However, we will receive proceeds from the exercise of the
2,253,929 outstanding warrants.
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TABLE OF CONTENTS
ABOUT US............................................................5
RISK FACTORS........................................................5
USE OF PROCEEDS.....................................................9
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............9
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION..........11
BUSINESS...........................................................14
LEGAL PROCEEDINGS..................................................20
MANAGEMENT.........................................................21
PRINCIPAL STOCKHOLDERS.............................................23
SELLING STOCKHOLDERS...............................................24
PLAN OF DISTRIBUTION...............................................29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................29
DESCRIPTION OF SECURITIES..........................................30
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......... ......................30
TRANSFER AGENT.....................................................30
EXPERTS............................................................30
LEGAL MATTERS......................................................30
FINANCIALS.........................................................F-1
RECENT SALES OF UNREGISTERED SECURITIES............................31
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ABOUT US
HOW WE ARE ORGANIZED AND OUR OPERATIONS
Alliance Recovery Corporation ("ARC" "Alliance" "we" "us" or the "Company") is a
development stage company. We intend to engage in the business of producing
electrical energy from waste and then selling it to industries such as
utilities. While reducing rubber waste into fuel oil for electrical energy
generation, we will also produce the required process fuel and marketable
by-products derived from the thermal process. These by-products include carbon
black, steel, and steam and/or hot water.
We intend, through future wholly-owned subsidiaries, to build processing plants
in various large urban centers of the United States. We intend to operate
strategically positioned manufacturing process units ("ARC Units") in selected
states of the United States. ARC Units are based upon several existing
manufacturing processes integrated into a single production facility. Prior to
the waste to energy process, an initial volume reduction system is designed to
compact approximately 3,000 pounds of rubber waste into 4' x 4' x 8' ecoblocks
for convenient and safe storage. The waste to energy conversion process reduces
waste rubber using a thermal process to produce fuel oil to power large
reciprocating engines driving alternators generating electrical energy for sale
to adjacent users or into local power grids. Scrap tires will be the main rubber
waste, which when reduced to oil, provides the fuel for the production of energy
and gases to power the ARC unit.
We will receive tipping fees in exchange for providing a point of final
disposition for rubber waste. In addition to process fuel gases generated in the
conversion reaction, the ARC Unit also has the ability to recover other residual
by-products from the rubber to oil thermal conversion process. Carbon black and
steel are recovered in marketable qualities and quantities. Steam and/or hot
water, produced during the thermal conversion process are also marketable
recovered by-products. The ARC Unit was developed by our founder, Peter Vaisler,
a team of third-party consulting engineers and scientists, as well as
individuals with specific business and process and equipment operations
knowledge acquired from hands on operating experience with the various system
components. The ARC Unit is an integration of existing process technology
currently in use as stand alone manufacturing processes.
We have identified a number of potential sites for the construction of our first
installation.
WHERE YOU CAN FIND US
We are located at #390-1285 N. Telegraph Road, Monroe, Michigan 48162-3368. Our
telephone number is (519) 671-0417 and our fax number is (519) 473-6507.
SECURITIES OFFERED BY US
We are not offering any securities. All shares being registered are for our
selling security holders.
RISK FACTORS
An investment in our common stock is highly speculative and involves a high
degree of risk. Therefore, you should consider all of the risk factors discussed
below, as well as the other information contained in this document. You should
not invest in our common stock unless you can afford to lose your entire
investment and you are not dependent on the funds you are investing.
Please note that throughout this prospectus, the words "we", "our" or "us" refer
to Alliance Recovery Corp. and not to the selling shareholders.
WE CAN LOSE THE RIGHT TO USE THE TECHNOLOGY THAT IS A VITAL PART OF OUR BUSINESS
PLAN SINCE WE ONLY HAVE THE RIGHT TO USE THIS TECHNOLOGY PURSUANT TO OUR
EMPLOYMENT AGREEMENT WITH PETER VAISLER, OUR CEO, PRESIDENT AND DIRECTOR
There is certain technology that we need to use to be able to carry out our
business plan. This technology is owned by Peter Vaisler, our CEO, President and
director. He licenses the technology to us pursuant to the employment agreement
we have with him. If Mr. Vaisler's employment agreement is terminated, we may
lose the right to use the technology. This will prevent us from carrying out our
business plan. However, if the employment agreement is terminated, we have the
right to license the technology for a onetime fee equal to the current
replacement value of the technology determined by an engineer's opinion
acceptable to us and Mr. Vaisler.
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WE HAVE A LIMITED OPERATING HISTORY, HAVE NO OPERATIONS OR REVENUES TO DATE AND
BASED ON THIS THERE IS NO ASSURANCE THAT WE WILL BECOME A SUCCESSFUL BUSINESS.
We are a development stage company with no operations or revenues to date. We
intend to utilize both design/build and turn-key equipment contracts, operation
and maintenance contactors to operate various components of our first
installation and will assemble a management and operations team familiar with
the plant's process system. However, our likelihood of success must be
considered in light of all of the risks, expenses and delays inherent in
establishing a new business, including, but not limited to, unforeseen expenses,
complications and delays, established competitors and other factors. The
services of seasoned contracted operators and experienced key management
professionals, is no assurance that we will ever achieve profitable operations.
Our success will depend, among other things, upon our ability to successfully
raise capital in the future in order to implement our business plan and on our
ability to develop and manage our business. There can be no assurance that we
will ever raise sufficient capital to implement our business plan or generate
significant net income or become profitable. Accordingly, the purchase of the
securities offered hereby must be regarded as the placing of funds at a high
risk and in an unproven venture with all the unforeseen costs, expenses,
problems, and difficulties to which such ventures are subject to.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO RAISE ADDITIONAL FINANCING IN THE
FUTURE
Our ability to achieve our business objectives are materially dependent upon the
receipt of proceeds from future financings. There can be no assurance that
additional financing will be available to us, or if additional financing is
available, that it will be in an amount or on terms acceptable to us. If we are
unable to secure additional financing, investors in our previous private
placements face the likelihood of the loss of their entire investment.
WE ARE DEPENDENT ON KEY EMPLOYEES, ENGINEERS, CONSULTANTS AND CONTRACTORS AND
THE LOSE OF ANY OF THEM OR THEIR INABILITY TO COMPLETE THE PROJECT CAN LEAD TO
OUR DEMISE
Our success is materially dependent upon the expertise and experience of our
executives and certain consultants. A corporate team of highly qualified project
managers, engineers, and experienced executives, familiar with the successful
commercialization of leading edge technologies, has been responsible for our
efforts to date. Key management positions have been identified and we continue
to have discussions with qualified candidates until such time as the entire
project capitalization has been completed. These individuals may leave their
current employment upon completion of our capitalization and may join us as
executives. However, there is no guarantee that the project capitalization will
be completed and similarly, if completed there is no guarantee that we will be
able to attract the appropriate management team in a timely manner.
The process system technology was designed and is being enhanced by our founder
and certain engineering consultants. This group includes Peter Vaisler, our
President and CEO; and Resource International Ltd., a Virginia-based engineering
firm that will be responsible for our overall project management, equipment
installation, site engineering, permit approvals, construction surveillance,
system design, sourcing and fabrication, mechanical and structural installation,
and operator training. The overall project will be managed by Resource
International Ltd. However, qualified and specialized sub-contractors will be
utilized by Resource International Ltd. for specific tasks. As an example,
Resource International Ltd. will utilize the services of a sub-contractor for
heat recovery design, and boiler systems fabrication selection and steam/hot
water energy systems. The ultimate engineering group has many years of
experience in process engineering and controls, energy production and waste to
energy, manufacturing, and thermal manufacturing and disposal technology, but
could be unsuccessful in completing the first installation. There is no
assurance that their combined expertise which includes waste disposal, waste
handling, incineration, thermal reduction, electrical generation and carbon
black manufacturing will allow the project to be completed.
Our success is also materially dependent upon the experience and expertise of
Peter Vaisler, our President, CEO and a Director, and his ability to attract
executives upon completion of our overall capital financing. There is no
guarantee that this financing will occur. We have entered into a five-year
employment agreement (effective upon approval of this SB-2 Registration
Statement) with Mr. Vaisler, which includes non-compete provisions and requires
his full time, attention and devotion toward our business objectives. The loss
of the services of any of our key personnel or consultants would likely have a
material adverse effect on our business. For a one-time fee, we have the option
to enter into a license agreement with Mr. Vaisler for the continued use of the
technology if and when he ceases to be employed by us.
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IF WE ARE UNABLE TO PROCURE NEEDED PERMITS, THE PROJECT WILL NOT BE COMPLETED
AND WE WILL, MOST LIKELY, CEASE OPERATIONS.
Resource International Ltd. has worked with our founder and will be engaged by
us to assist in obtaining all regulatory permits. If we are unable to acquire
all needed permits, we would be unable to start our business and would be forced
to seek permits elsewhere which could critically delay or cancel the overall
project. This could cause us to cease our operations.
UNIQUE RISKS OF OUR BUSINESS
IF WE DO NOT PROCESS WASTE, OUR REVENUES WILL NOT BE SIGNIFICANT AND NEGATIVELY
IMPACT OUR OPERATIONS AND FUTURE EXPANSION
There may not be a sufficient volume of waste rubber generated in vicinity of
our first showcase facility, at a site to be determined to make our operations
cost efficient. Furthermore, we may not be able to encourage tire jockeys,
truckers and waste operators servicing these areas to utilize our first facility
an facility as an alternative to trucking the waste to disposal sites positioned
away from urban cities or to out of state disposal sites. Our targeted
marketing/education program may not be successful in getting those operators in
the disposal chain to be "environmentally responsible" by utilizing an urban or
regionally based point of final disposition instead of trucking the waste to
another jurisdiction, possibly even out of state. Also, tire and rubber goods
manufacturers may develop products that will not wear out or have an extended
life thereby reducing the volume of rubber waste generated annually requiring
disposal. If any of the above occurs, we will not have sufficient revenues. This
will have a negative impact on our business and can deter our future expansion.
POSSIBLE CHANGES IN ENVIRONMENTAL REGULATIONS CAN MAKE IT DIFFICULT AND COSTLY
TO COMPLY WITH AND CAUSE US TO CHANGE OUR BUSINESS PLAN AND RESULT IN A
REDUCTION OF REVENUES
Unforeseen changes in environmental regulations could make it difficult, or even
impossible for management and their engineering team to amend existing
environmental permits or to reapply for new permits. Changes in Federal or State
laws could make it difficult or impossible to comply with emission, storage,
operation and transportation regulations. This can result in a change to our
business plan if we can not obtain certain amendments to permits or such changes
cause us to expend more resources than expected. In addition, this will most
likely lead to a reduction in revenues.
In addition, changes in government policies affecting storage, handling and
processing of scrap tires, rubber waste and air quality standards could have a
material adverse effect on us.
A CHANGE IN MARKET OR ECONOMIC CONDITIONS CAN RESULT IN LOSING THE MARKET FOR
ELECTRICAL ENERGY THAT WE INTEND TO PRODUCE RESULTING IN A CESSATION OF OUR
BUSINESS
There may not be a market for the electrical energy generated as a result of a
change in market or economic conditions, and implementation of a new form of
energy production technology and/or materials. Also, there may not be a market
for the by-products we intend to produce, including carbon black, steel and
steam and/or hot water. Poor economic conditions and/or high fuel costs could
cause disruptions in transportation and/or labor disputes in a declining or
inflationary economy and could make it impossible to obtain waste rubber for
conversion to fuel oil. However, an inflationary economy could actually benefit
us as increased energy prices would increase revenues from both electricity and
carbon black sales. The facility may never be able to acquire a sufficient
inventory as a result of any or a combination of the aforementioned and result
in the cessation of our business.
SEVERAL FACTORS COULD RESULT IN OUR FACILITY NOT OPERATING PROPERLY AND LEAD TO
OUR DEMISE
Although similar process furnaces are operating at numerous locations around the
world, the oil conversion furnace and all ancillary equipment normally
7
associated with thermal reactions may not function properly and neither the
fabricator/suppliers nor management or their engineering team may be able to
correct the deficiency. Employees could sabotage the processing equipment
causing a business interruption causing the facility to not make sufficient
product or energy to meet its financial projection. We expect to enter into a
contractual arrangement with a third-party operator for the production and sale
of the electrical energy to be produced. The contract may never be completed.
All of the above factors could result in our demise.
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP A MARKET FOR OUR PRODUCTS WHICH WILL
CAUSE US TO FAIL TO MEET PROJECTED REVENUES
We intend to sell electricity to local utilities. The contracted electrical
utility company responsible for electrical energy generation and sales may not
be able to develop sufficient market share for electrical energy. Similarly,
management and our consultants may not successfully develop a market for carbon
black, scrap steel or other residual products we could generate, and as a result
may not achieve projected revenues. The failure to reach certain financial
performance levels could negatively impact our financial viability and could
make it difficult for us to expand operations into additional U.S. urban cities.
Furthermore, business expansion into European or other international markets
would likely not transpire and would be dependant upon our ability to remedy
issues pertaining to financial performance.
IF WE DO NOT ATTRACT CERTAIN MARKETING, OPERATIONS AND ENGINEERING STAFF, WE
WILL HAVE DIFFICULTY IN MANAGING OUR FIRST FACILITY. THIS CAN RESULT IN A DELAY
OF STARTING UP THE FACILITY AND/OR A REDUCTION OF REVENUES BASED ON LOWER OUTPUT
RATES
Although key operations positions are contracted out, we may not be able to
attract marketing, operations, and engineering staff with sufficient acumen and
abilities to successfully manage our first facility. Training deficiencies could
cause the facility to operate at lower output rates, which would negatively
impact our financial performance. Similarly, the start-up period of the facility
could be extended as a result of fabricators and/or contractors correcting
technical deficiencies. Although delivery and performance guarantees will be
provided by fabricators and/or contractors, a business failure by any of these
entities could delay the start-up of the installation, while financial and other
guarantees, notices and cure periods are implemented with respect to completing
the installation and start-up of the facility.
THE FAILURE OF REGULATORY APPROVAL BY GOVERNMENT AGENCIES FOR OUR FUTURE SITES
WILL RESULT IN A DELAY ON REALIZING A RETURN ON OUR INVESTMENT
The selection of future sites and the development and operation of our
installations are subject to regulatory approval by governmental agencies. While
the fact that our engineering consultants at Resource International have
pre-qualified 12 sites from an environmental approval perspective, each site may
be subject to local and state regulations concerning storage, processing and
handling of rubber waste including scrap tires and air quality standards.
Additionally, there can be no assurance that we will be able to locate and lease
or purchase a sufficient number of suitable sites within the expansion area or
that difficulties will not be encountered by us or third parties in their
efforts to secure necessary approvals which could delay us from realizing a
return on our investment.
WE WILL NEED TO RAISE FUNDS TO DEVELOP ADDITIONAL INSTALLATION OF FACILITIES AND
THERE IS NO ASSURANCE WE WILL RAISE SUCH FUNDS
We will also be dependent on our ability to raise funds to develop additional
installation through private placements or other sources. We have no plans, at
this time, to secure solid waste disposal bond funds. There can be no assurance
that in the case of solid waste disposal bond funds that provide tax incentives
to promote the availability of solid waste disposal bonds will continue. The
ability to raise additional funds will be determined by the operational success
of the first installation to be built upon a yet to be determined site. Thus,
there can be no assurance that we will be successful in obtaining financing.
8
THE OPERATION OF OUR FACILITY MAY RESULT IN LIABILITY CLAIMS AGAINST US
RESULTING IN POSSIBLE DAMAGES ABOVE OUR INSURANCE LIMITS AND NEGATIVELY
AFFECTING OUR PROFITABILITY
Our facilities, when operating, may be subject to liability claims in the event
that our operation results, or is alleged to have resulted, in adverse effects
during development or operation. There can be no assurance that insurance, if
obtained, will provide adequate coverage against potential claims. We may be
exposed to such liability claims that could have a material adverse effect on
us.
OTHER ENERGY COMPANIES AND DISPOSAL COMPANIES WITH MORE EXPERIENCE MAY COMPETE
WITH US CAUSING A DECREASE IN THE MARKET SHARE
While we believe we have no direct competitors, a number of other firms are
engaged in the production of energy, carbon black and the like. Also, other
firms are engaged in the business of disposal and processing of scrap tires. Our
likely competitors are: JM Beer Corp., Conrad Industries, and Unisphere
Corporation. If such companies compete with us, this can result in a reduction
of our market share.
OUR PRINCIPAL OFFICER AND A DIRECTOR HAVE CONTROL OF US
Peter Vaisler, our President, CEO and Director, and David Williams and Walter
Martin, our directors, in the aggregate own approximately 59% of our issued and
outstanding common stock. Therefore, they control us and can control the
election of our directors and officers.
THERE IS PRESENTLY NO PUBLIC TRADING MARKET FOR OUR SECURITIES AND THIS CAN
AFFECT THE RESALE OF YOUR SHARES
There has been no public or private market for our common stock, and there can
be no assurance that any such market will develop in the foreseeable future.
Therefore, there is no assurance that the shares can be resold.
USE OF PROCEEDS
The selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares.
DETERMINATION OF OFFERING PRICE
The price of $0.50 is being estimated solely for the purpose of computing the
registration fee pursuant to Rule 457 (c) of the Securities Act and is based
on the share price paid by the selling security holders for the purchase of the
shares; and is based on the exercise price of the warrants for the shares of
common stock issuable in connection with the conversion of warrants.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has never been traded. Upon approval of this registration
statement, we intend to apply for a quotation of our shares of common stock on
the OTC Bulletin Board. As of December 20, 2004, we had 130 shareholders of
record. Such shareholders of record held 18,309,156 shares of our common stock,
in addition to 2,253,929 shares of our common stock issuable upon the exercise
of all of our outstanding share purchase warrants.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 20, 2004, with
respect to compensation plans under which our equity securities are authorized
for issuance:
9
(a) (b) (c)
-------------------- -------------------- -------------------
Number of securities
remaining available
Number of securities for future issuance
to be issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, excluding securities
warrants and rights warrants and rights reflected in column (a))
-------------------- -------------------- -------------------
Equity compensation
plans approved by
security holders None
Equity compensation
plans not approved
by security holders None
DIVIDENDS
We have never paid a cash dividend on our common stock. It is our present policy
to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate that cash dividends will be paid
until our earnings and financial condition justify such dividends. There can be
no assurance that we can achieve such earnings.
PENNY STOCK CONSIDERATIONS
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from effecting
transactions in our securities, which could severely limit their market price
and liquidity of our securities. Broker-dealers who sell penny stocks to certain
types of investors are required to comply with the Commission's regulations
concerning the transfer of penny stocks. These regulations require
broker-dealers to:
- - Make a suitability determination prior to selling a penny stock to the
purchaser;
- - Receive the purchaser's written consent to the transaction; and
- - Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our financial
condition. The discussion should be read in conjunction with our financial
statements and notes thereto appearing in this prospectus. The following
discussion and analysis contains forward-looking statements, which involve risks
and uncertainties. Our actual results may differ significantly from the results,
expectations and plans discussed in these forward- looking statements.
Overview
We are a developmental stage company that is in the process of implementing our
business plan to develop a showcase waste to energy facility at a site to be
determined. The first showcase installation will be the cornerstone for both
United States and European expansion. It will thermally convert rubber waste to
oil and subsequently use the oil as fuel for large reciprocating engines driving
alternators making electricity. In addition to the sale of electricity, several
additional valuable bi-products produced in the thermal conversion process will
also be sold into either domestic or international markets.
Our business plan is focused on providing large urban centers with community
based processing facilities to address the needs of rubber waste disposal where
the waste is generated. This rubber waste is largely scrap tires. Similarly,
large urban centers also have an increasing requirement for electrical energy
for both domestic and industrial use. Our processing facilities can be located,
constructed and operated to meet the specific needs of the community in an
environmentally friendly manner.
We believe that the effective implementation of our business plan will result in
our position as a leading provider of community based waste to energy
installations dealing with rubber waste at source while providing reliable
electrical energy to meet base load and/or on peak energy demands.
The successful implementation of the business plan will also be dependent on our
ability to meet the challenges of developing a management team capable of not
only the construction and operation of the first installation but also marketing
management and the implementation of specific marketing strategies. These
strategies will include the utilization of specific existing distribution
channels and disposal infrastructure in order to market our products and
disposal services. Additionally, it will be necessary to educate targeted
jurisdictions about the environmental and commercial benefits of an Alliance
installation in their community.
No revenues have been generated to date and we do not anticipate revenues until
such time as the first facility has been constructed and commercially operated.
The construction of the first showcase facility will require $20 million. We
believe there are several sources of capital that can be exploited to meet the
$20 million capital requirement. However, currently there are no commitments for
capital and furthermore, the successful implementation of all aspects of the
business plan is subject to our ability to complete the $20 Million
capitalization. It is expected the required funds will be raised as a result of
private offerings of securities or debt, or other sources.
Should the required funding not be forthcoming from the aforementioned sources,
public offerings of equity, or securities convertible into equity may be
necessary. In any event, our investors should assume that any additional funding
will cause substantial dilution to current stockholders. In addition, we may not
be able to raise additional funds on favorable terms, if at all.
11
Plan of Operations
We have forged relations with several corporate finance entities that have
expressed an interest in participating in our overall expansion in the United
States and Europe. In most cases, as a condition precedent to their
participation, we must be publicly traded on a recognized stock exchange. The
efforts of our management team and our consultants and advisors will be to
complete appropriate financing arrangements. The completion of the $20 million
financing will be our exclusive effort prior to the construction and development
of the first installation.
Upon completion of the $20 million capitalization, our next priority will be the
construction of the first installation. For this construction, it will be
necessary for management to initially focus on two specific activities. First,
project management consultants will be engaged to assist us in all matters
associated with the identifying and preparing the site. This activity includes
regulatory approvals as well as final design and layout based upon commercial
equipment available for procurement and/or fabrication.
Second, our management and consulting engineers will commence activities to
enlarge our management team by adding key employees as well as consultants that
will be responsible for specific tasks & operations associated with the first
installation.
During the permitting period of 90 to 120 days, our engineering and fabrication
team will finalize design and layouts for the first site as well as prepare and
circulate site building bid documents. Similarly, turnkey contracts will be
negotiated for specific pieces of the thermal processing equipment utilized in
the rubber to oil conversion process. The supply and operation of the electrical
generation equipment will also be contracted out during this period of the
development. We have already identified and pre-qualified several suppliers of
the type of electrical generation equipment.
Also at this time, some preliminary site work will be completed to facilitate
the installation of the design/build structures required. The site will also be
prepared to accept the modularized electrical generation equipment that will be
installed on the site subsequent to the installation and start-up of the thermal
conversion process. The contracted operator of the electrical generation
equipment will also be responsible for the sale of electricity. During initial
discussions with these supplier/operators, an interest has been expressed in
participating in our overall business. Some discussions pertaining to the
exchange of our shares for all, or part, of the value of the turnkey have
transpired. However, it is unlikely that meaningful discussions will commence
until such time as our capitalization set forth above has been completed. Even
if the capitalization has been completed, there can be no certainty that the
contract operators will participate in the first installation other than on a
fee for services basis.
The overall fabrication and installation timeframe is approximately 365 days
from execution of contracts. As all the components utilized in our installation
are currently in use in manufacturing operations in the United States and around
the world, lead times for delivery and installation are generally short. Several
components are stock items and available for almost immediate delivery. However,
the engineering firm responsible for the overall project management of the first
installation will monitor all fabricator/suppliers to ensure that the various
components and required ancillary equipment and structures have been readied on
site for installation. Additionally, engineering verification will be required
for all progress draws prior to our making payments to the various
supplier/fabricators. As is customary with the supply of this type of equipment,
established payment holdbacks upon completion of installation and start-up will
be released only upon engineering verification of performance. Additionally, it
may be necessary for selected fabricator/suppliers to provide delivery and
performance bonds specific to their components.
The supplier/fabricators will also be responsible for the training of key
employees and/or contractors and will work with the engineering project managers
to include established operating protocols in the systems operations manual. In
conjunction with this effort, during the start-up of the first installation,
fabricator/suppliers and the project management will establish operating set
points incorporating them into the system software thereby ensuring continued
reliable system performance and measurable quality standards.
Overall, the entire installation through construction completion, training,
start-up and commercial acceptance based upon engineering performance
verification is approximately 18 months. The overall development schedule could
be delayed as a result of unforeseen regulatory delays, labor disputes and
seasonal delays due to weather conditions.
12
Pursuant to preliminary discussions with corporate finance professionals, items
#16 through #18 set forth below are anticipated fees and expenses pertaining to
the $20 million financing that we will be seeking. The following schedule
outlines the categories associated with the financing, completion, start-up and
commercial operation of the first installation. It is expected that many of the
following development categories outlined in the following schedule will be
completed concurrently.
1) Consulting Fees & Out-of -Pocket Reimbursement $480,000
2) Site Lease Matters & Development Fees $260,000
3) Site Engineering, Regulatory & Compliance $211,500
4) Site Work $1,125,600
5) Buildings $798,500
6) Rubber to Oil Thermal Conversion Process Equipment $7,736,500
7) Warehouse & Conveyance Equipment Leases/Purchases $74,083
8) Government Relations $41,000
9) Administrative Construction Expenses $153,000
10) Legal, Accounting, Travel & Misc. Fees & Expenses $322,000
11) Media, Promotion & Government Relations $313,000
13) Salaries, Wages & Fees $846,434
14) Consulting Engineers $33,000
15) Turn-key Energy System & Installation $5,000,000
16) Financing Fees $2,000,000
17) Financing Legal & Accounting $300,000
18) Administrative Contingency $305,383
Total $20,000,000
During the construction and installation of the first facility, management will
commence specific and targeted marketing initiatives at the current rubber waste
disposal infrastructure, regulatory agencies, retail associations and the
public. All communities in the United States are being encouraged by state and
federal officials to be more environmentally responsible. Community based
environmental initiatives are being encouraged. Dealing with waste at the source
is considered much more environmentally friendly than trucking the waste
hundreds of miles away. The first installation is perceived as a convenient and
environmentally friendly solution to rubber waste. The targeted marketing
campaign will exploit the current thinking pertaining to community based waste
reduction and processing and waste to energy initiatives.
A targeted marketing campaign pertaining to the sale of carbon black and scrap
steel will also commence prior to completion of construction. We have identified
several experts currently responsible for the sale of carbon products that have
expressed an interest in heading up this effort. Furthermore, the heat recovery
system utilized through the entire system will be ready to deliver hot water
and/or steam to a greenhouse operator. Although we have yet to complete an
agreement with a hydroponics greenhouse operator, preliminary discussions would
indicate that the availability of reliable, yet discounted heat, is an
attractive solution to their current consumption of non-renewable resources to
fuel boilers to generate the required hot water.
13
BUSINESS - OUR COMPANY
A SUMMARY OF WHAT WE DO
About Us
We intend to implement suitable resource recovery technologies and strategies
(the "ARC Process") to convert industrial and other waste materials into
electrical energy for sale to specific industrial entities or into local power
grids, and to produce for re-sale by products including carbon black, steel, and
steam and/or hot water.
We believe that management and our third party consulting engineers have
identified a one-step manufacturing process based upon the utilization of
existing manufacturing processes to efficiently convert rubber wastes of all
kinds including scrap tires into fuel oil, for electrical power generation, with
minimal if any negative impact to the environment. We believe this system may be
patentably distinct, however, the system components are available commonly from
fabricator and suppliers. The results of our development efforts are now
commercially available.
Investigations of several existing thermal manufacturing and processing
technologies have contributed to the use of existing manufacturing and chemical
processes as the basis of the ARC Unit for the production of oils and gases and
other commercial products including carbon black.
United States Environment Protection Agency studies conducted during 1999-2000
have confirmed that the fuel oil derived from rubber waste was as good a
feedstock for commercial carbon black production as Exxon oil.
The first ARC facility, when funded, will be operated as a subsidiary of the
Company and will take approximately 18 months to construct. Upon construction
and installation of processing equipment, the facility will annually utilize up
to 100,000,000 pounds of waste rubber as the feedstock to produce oils and gases
for the production processes and to generate electricity. In terms of passenger
tires, this represents the annual reduction of approximately 4.6 million scrap
tires.
In 2001, 292 million scrap tires were generated in the United States. Of the 292
million scrap tires, cars contribute two-thirds of scrap tires, the remainder
comes from trucks, heavy equipment, aircraft, off-road and scrapped vehicles.
The aforementioned number of scrap tires generated is equivalent to
approximately 1 scrap tire for every person living in the U.S. today. In
Michigan, Ohio, New York, Pennsylvania, and the province of Ontario, the
population is well over 50 million, and all these major states are connected to
Lake Erie . We have identified suitable sites with port locations in the great
lakes region to allow for the utilization of tug and barge transportation which
continues to be the most inexpensive form of transportation for large volumes of
freight.
14
We anticipate that the first Facility will produce fuel oil to be used for the
production of electrical energy. The oil generated from the thermal
decomposition of rubber analyzed by various testing facilities is equivalent to
a fuel oil comprised of 69% kerosene and 26% diesel fuel. Continued commercial
use of both diesel and kerosene is indicative of the overall fuel quality.
Similarly, a commercial grade 700 series carbon black is generated as by-product
of the rubber to oil conversion process. This process also captures the steel
from the rubber for sale as scrap. We believe that there are international and
domestic markets for these products. According to industry sources, global
consumption of carbon black is approximately 17 billion pounds annually. Carbon
black is an industrial product generated through an energy-intensive process and
utilized among and in the manufacture of rubber, plastics, inks, paints, dyes,
lacquers, fibers, ceramics, enamels, paper, coatings, leather finishes, dry-cell
batteries, electrodes and carbon brushes, and electrical conductors.
Conventional carbon black manufacturers need both: a manufacturing feedstock oil
for conversion to carbon black, and natural gas or methane to fuel the
production process. The ARC process also saves global resources by recovering
the hydrocarbon available from the polymeric constituents of the waste rubber,
converting them to feedstock oil and gases. By maintaining carbon black
manufacturing temperatures and process conditions in the ARC Unit furnace, as
the rubber waste is converted to fuel oil, a 700 series carbon black is
generated as a by-product of the thermal process and is subsequently conveyed,
stored and/or packaged with conventional carbon black manufacturing equipment.
The utilization of existing process technology and chemical reactions with
established manufacturing protocols ensures that ARC management and their
contract operators can leverage specific operations history into positive
performance results.
An ARC installation also provides large urban regions with a point of final
disposition for scrap tire and rubber waste without any pollution to the
environment and/or public health risks. Disposal operators will be encouraged to
deliver their rubber waste in the baled ecoblocks which is a much more cost
effective method of transportation as a direct result of the volume reduction
occurring in the baling process. The baling process ARC will utilize to produce
ecoblocks for safe storage and handling, ensures that water cannot collect and
create conditions suitable for mosquito incubation, a matter that continues to
be a public health concern throughout the United States. Additionally, ecoblock
storage from a fire perspective is considered a much safer alternative than
simple dumping of rubber waste as there is negligible fire hazard associated
with ecoblock storage. Fire Department testings suggest that the bales are
difficult to ignite and once ignited, are easily extinguished.
The ARC Process is not classified as a federally regulated source of emissions,
because the environmental emissions are below maximum EPA standards, thus, only
state administrative approval is required for our plant installations. It is
intended that ARC installations will be located near large urban communities
which generate vast amounts of rubber waste. This will allow us to establish a
network of facilities in communities where rubber waste is generated.
Generally, communities view tires as a public health issue as the tire collects
water in the hollow donut shape and becomes an ideal breeding ground for
mosquitoes. The most common practice is hauling the rubber waste hundreds of
miles for shredding to turn it into tire derived fuel (TDF), and subsequently
transporting the TDF to combustion markets. As a result of positioning the ARC
facility in the communities where the waste is generated, the environmental
impact associated with trucking the waste rubber, as well as highway wear and
tear are minimized. The transportation of the waste also consumes diesel fuel, a
non-renewable resource. A community based ARC facility is a cost effective and
environmentally friendly alternative to current disposal options. Furthermore,
EPA and State initiatives to encourage States to take responsibility for the
waste they generate has once again commanded public attention as a result of,
for example, Toronto (Canada) garbage being trucked to Michigan.
Large urban centers usually require enormous amounts of electrical energy, and
via our ARC Centers, we will be able to provide another source for electrical
energy. Community-based ARC installations will be positioned to address the
growing need for reliable energy sources with the added benefit of providing a
final point of disposition for rubber waste.
The total improvement and equipment cost for installation and start-up for first
installation is estimated to be $18,000,000, with the overall capital budget of
$20,000,000.
15
Management Team
- ---------------
Management is headed by Peter Vaisler, our President & CEO. Upon completion of
financing, a business manager will be hired to address issues pertaining to
finance, marketing and regulatory and compliance. Initially, the process
construction and installation management team will be comprised of Mr. Vaisler
and engineering consultants of Resource International Ltd., a Virginia, USA,
based engineering firm that will be responsible for overall ARC project
management, equipment installation, site engineering, permits, construction
surveillance, system design, sourcing and fabrication, mechanical and structural
installation, and EPA approved operator training. The overall project will be
managed by Resource International Ltd. However, qualified and specialized
sub-contractors will be utilized by Resource for specific tasks. As an example,
Resource International Ltd. will utilize the services of a sub-contractor for
heat recovery design, and boiler systems fabrication selection and steam/hot
water energy systems. Similarly, a utilities operator will be contracted to
manage the electrical generation component of the ARC Unit. Our strategy is to
augment the management team with the required managers and supervisors as the
business moves into the construction and operations phases of the first showcase
facility.
The Vice President of Operations ("VP") will be an individual that currently
holds similar positions in an organization in the carbon production sector. The
VP will join us following the hiring of a business manager who will be hired
upon completion of this private placement. The VP will also be responsible for
the marketing of carbon black from the first installation. Marketing services
will be provided to us either on a contract basis with an existing carbon
manufacturer or can be on a direct basis to several rubber formulators that
manufacture custom rubber blends for specific rubber products for industrial or
consumer use. A Controller will be hired once it is monetarily feasible. Our
accountants will carry out accounting and financing functions on an interim
basis.
A corporate management team of highly qualified and experienced executives,
familiar with the successful commercialization of leading edge technologies, has
been responsible for the our research and development efforts. Our President and
CEO, Mr. Peter Vaisler, has been responsible for the management of the research
and development effort to date. Mr. Vaisler has acted in a project management
capacity throughout his career and has been responsible for the installation and
start-up of fractional evaporation manufacturing facilities and has also been
responsible for the commercialization of leading edge technologies.
Mr. David Williams, our director is experienced in investment management and
will be providing financing guidance and management to us.
Resource International Ltd. is an engineering firm started in 1979, by Michael
E. Fiore, P.E. and John L. Combs, P.E. Resource International Ltd. has over 70
employees in its Ashland headquarters and Charles Town, West Virginia branch
office. Resource International Ltd. serves government and private clients
providing land development, water, wastewater, solid waste and planning
projects. Over the years, Resource International Ltd. has worked throughout the
Continental United States and has completed projects in Mexico and the
Caribbean. Resource International Ltd. has a history of providing clients with
cost effective and innovative engineering solutions to difficult problems.
Financing
- ---------
We intend to complete a $20,000,000 financing (private placement of debt/equity)
in order to construct the first facility. We continue continue with the strategy
of using third party, seasoned financial experts and professionals to provide
the stewardship required to complete our overall financial objectives.
Expansion
- ---------
Our focus is to turn environmentally friendly waste to energy, and also sell
them as carbon black and similar product byproducts. As a result of the readily
available fuel source in specific areas, expansion will be targeted toward
high-density population areas in the U.S. where scrap rubber generation and a
disposal infrastructure already exists. ARC Facilities will provide the needed
point of disposition for scrap rubber disposal within a communitity's'
industrial areas. Within these communities there currently exists a disposal
infrastructure including retailers, waste haulers and disposal companies, tire
jockeys and recyclers, truck and industrial re-treaders, and independent
truckers and trucking companies, which could benefit from the availability of a
nearby point of final disposition for rubber waste. Points of final disposition
are not usually found in or immediately adjacent to large urban centers.
16
Our expansion into these high-density population areas in the U.S. will
position us as a convenient and cost effective alternative to the customary
practice of hauling the waste rubber long distances to permitted disposal sites.
Extensive public education campaigns will be targeted at these urban centers to
raise the level of awareness pertaining to responsible disposal of rubber waste
by having communities become a part of the "environmental alliance". Awareness
campaigns involving the public, retailers, state legislators and regulators will
be utilized to market ARC installations as a final point of disposition for
rubber waste within communities (target locations) where the waste is generated.
Based upon the first facility, each ARC Unit's disposal capacity will be capable
of processing 100,000,000 pounds of waste rubber annually. This is equivalent to
approximately 5,000,000 passenger tires. Normally, within the industrial makeup
of these communities, there are numerous industries requiring the carbon black,
steel and steam and/or hot water available from our processing system.
Discussions with a greenhouse operator have commenced to locate hydroponics
operations immediately adjacent to ARC installations. ARC will provide the
hydroponics operations with heat recovered from the overall ARC process thereby
minimizing any contribution to global warming. In the simplest of terms, the
hydroponics green house acts like a radiator for the reciprocating engines
making electricity, as well as acting as the radiator for the rubber to oil
conversion process. ARC installations will provide required disposal
infrastructure to select urban areas where large volumes of scrap rubber are
generated and there are few, if any, points of final disposition for this waste.
The obvious benefit to these urban centers is the minimization of transportation
pertaining to disposal and the additional positive environmental impact
associated with community based disposal and the production of electrical energy
to meet soaring demands without the consumption of non-renew resources.
Product, Markets, & Services
- ----------------------------
The North American carbon black consumption is approximately six (6) billion
pounds annually, and the global consumption of carbon black is approximately
17.2 billion pounds annually. Our energy and carbon black process innovation
provides a technically and economically viable industrial solution to waste
rubber disposal which is a major global environmental issue in the U.S. and
internationally.
We will generate electrical energy for regional use and supply 700 series carbon
black to the rubber formulation and product industry. Carbon black can also be
blended with the product of larger manufacturers of carbon black to facilitate
EPA and state environmental "efforts" to include scrap rubber derivatives in new
rubber formulations. According to the technical representatives of ITRN, a
manufacturer of rubber formulations, customers are now demanding as much as 25%
recycled content in rubber compounds. The use of carbon black manufactured from
a feedstock oil derivative from waste rubber, does not impact upon the overall
quality of the rubber ultimately produced. According to ITRN technical
representatives, there are significant quality issues related to the use of
recycled crumb rubber in rubber formulations they produce. At present,
approximately 95% of the US carbon black market is controlled by five (5)
manufacturers.
The ARC Process will have the capacity to manufacture up to 14,000,000 lbs. of
carbon black annually from the rubber-to fuel oil conversion processes. This
represents only a fraction of carbon black consumed in the growing U.S. market.
In addition to the production of carbon black, the thermal reduction of rubber
in the process system will also generate quality additional residual
by-products. As well as the production of gases which are used as fuel in the
process, approximately 90,000 barrels of No. 4 grade fuel oil for energy
production and 2,300 tons of scrap steel are generated annually, which all
contribute to our projected profitability. Carbon black and steel are products
that can be sold into existing domestic and international markets.
The addition of oil burning reciprocating engines to make electricity is a
natural addition to the ARC process and will provide an additional $3,000,000 in
net revenues for us. By consuming the oil generated in the process, the facility
is capable of generating electrical energy with a baseload of 8 MW. Thus, by
recovering the oil and gases from thermally decomposed waste rubber and
producing 14,000,000 pounds of carbon black annually, this technology will be
saving the oil and gas non-renewable resources needed to produce an equivalent
amount of carbon black from a conventional manufacturing process while also
using the surplus fuel oil to make electricity. We are also prepared to operate
the electrical generation capacity as a peaker, supplying electricity during
peak usage periods at prices that can be three to four times the basic rates.
The entire electrical generation business component will be managed by an
electrical utility company ultimately contracted to operate our generation
capacity.
17
Competitive Advantages and Strategy For Success
- -----------------------------------------------
The ARC Process is an environmentally friendly manufacturing process with the
added benefit of being a scrap rubber and tire disposal solution. Facilities
will be located immediately adjacent to large metropolitan areas where the scrap
rubber is generated. This provides for a convenient disposal option when
compared to the usual practice of trucking scrap tires long distances away from
urban areas that will not tolerate tire dumps. The target communities are all
aware of the problems associated with scrap rubber and tire waste disposal. We
view these communities as a source of fuel that is utilized at the ARC Unit to
make electricity.
Furthermore, our process does not simply change the problem by converting the
rubber waste to shreds or a stable mat-like product (for example, mud flaps,
brake pedal pads, jogging mats, etc.) which require a re-sale, but rather into
usable fuel. Although the shredding industry continues various initiatives to
develop new markets for shreds and tire derived fuel (TDF), environmental
pressures could continue to negatively impact the continued burning of tire
shreds making other processing alternatives more attractive.
Locating our plants in the vicinity of large metropolitan areas, also allows us
to target specific industries within those communities that require carbon
black, scrap steel, steam and/or electrical energy. Unlike previous rubber
disposal solutions such as cryogenics, crumb rubber operations, and monofill;
the process we provide is very environment friendly.
Whereas conventional carbon black manufacturing requires the purchase of an oil
feedstock and process fuel, we will be paid a disposal fee as a point of final
disposition for rubber waste, and then thermally decompose the rubber waste into
both oil feedstock and process fuel. As a result of the rubber to oil conversion
process, a commercial grade of carbon black is produced as a by-product. We are
positioned to supply a commercial grade of carbon black to the rubber
formulation and product market at extremely competitive prices. Similarly, using
the oil from the ARC Unit to power reciprocating engines to make electrical
energy allows ARC to provide a reliable source of energy with extremely low and
predictable fuel costs. More importantly, the sale of electricity generates a
reliable source of revenues.
This first installation will be constructed as a showcase installation, an
example of what we plan to replicate in other major urban areas. Municipal
leaders and regulatory officials from various areas in the U.S. will be
encouraged to visit the facility. The facility will also act as the training
center for other ARC subsidiaries.
Environmental Impacts of Products and Production Processes
- ----------------------------------------------------------
Our ability to manufacture a new product from a scrap rubber derivative (fuel
oil), in a conventional and environmentally friendly manner is an extremely
attractive alternative to current recycling approaches which are simply not
capable of dealing with the annually generated volume of rubber waste in the
U.S. in a feasible or environmentally friendly way. Current recycling efforts in
the U.S. simply cannot deal, in an economically viable manner, with the volume
of waste rubber generated annually. Many of these efforts simply change the
shape of the problem into a consumer product that is ultimately disposed of at
conventional dump sites.
The ARC manufacturing process does not qualify as a federally regulated source
of emissions. Only state and local approvals are required. ARC's ability to
permit facilities in large urban centers will allow the Company to establish a
network of facilities in communities where rubber waste is generated rather than
hauling this waste hundreds of miles for shredding to TDF (define) and
subsequently transporting the TDF to combustion markets, perhaps close to the
communities where the tires originated.
Furthermore, markets for the sale of the commodity like products we generate
also exists within large metropolitan communities that we target for subsequent
plant installations. The aforementioned business provides us an industrial
solution to a major environmental problem. In addition, the availability of
power generation equipment can be leveraged and will permit ARC to offer energy
solutions based upon resource recovery. Availability of reliable sources of
18
electricity has come to the forefront of public concern, as a result of the
State of California energy crisis in the winter of 2001 and industry
de-regulation in the U.S. and Canada.
The Industry
ARC installations will provide a final point of disposition for waste rubber
either in, or immediately adjacent to, the communities where the waste was
generated. Generally, the U.S. waste industry is not prepared to address the
problems associated with specific kinds of waste rubber and particularly scrap
tires. The carbon black industry has manufactured carbon black for 80 years by
burning a fuel oil. Industry estimates indicate that approximately 7 billion
pounds of carbon black are consumed in the U.S. each year with global
consumption at 17 billion pounds. Carbon black manufactured by us will be sold
into existing U.S. and international carbon black markets and be produced as a
result of the thermal reduction of rubber waste to fuel oil, the oil thereby
being the feedstock for carbon black production. The surplus fuel oil can be
used to fuel generators to make electrical energy. We will be uniquely
positioned in several industries: rubber waste disposal, manufacturing, and
power generation.
As rubber waste is the source of fuel oil, it is important to understand the
waste industry as it relates to scrap tire disposal which will constitute a
significant volume of the waste rubber processed at an ARC installation. Scrap
tires are a major environmental problem. It is estimated by the United States
Environmental Protection Agency (the "EPA") that there are over 1.5 to 3 billion
used tires in landfills and stockpiles in the United States and that an
additional 292 million tires are discarded in the United States every year.
"Disposing" of tires by stockpiling is not a viable long-term solution because
of fire hazards and the likelihood of spreading disease. "Disposing" of whole
tires in landfills is, generally, prohibited or restricted by regulation.
Scrap Tire Distribution Chain
In general, the scrap tire distribution chain consists of the tire end-user
(business or consumer), new tire retailers, used tire brokers, solid waste
disposal companies, haulers and tire processors. Most scrap tires are originally
obtained by new tire retailers from consumers who may pay the retailer a fee for
"disposing" of their used tires. Retailers may pay either a scrap tire broker, a
solid waste disposal company, a hauler or a tire processor to remove scrap tires
from their place of business. Scrap tire brokers typically retain some tires for
resale as used tires and pay either a waste disposal company, a hauler or a tire
processor to remove the remaining scrap tires from their place of business.
Solid waste disposal companies may stockpile scrap tires or pay a processor to
dispose of their tires. Haulers transport scrap tires between parties in the
distribution chain and may also act as a used tire broker or other party in the
distribution chain. Not until a tire processor processes the scrap tires are the
tires ultimately disposed of.
Our products and services include:
Tipping Fees
The fees paid by those who have scrap tires for their ultimate disposal are
referred to as tipping fees. Tipping fees will be an important source of revenue
for Alliance. As of May, 1991, 21 states had special fees for tires or vehicles.
Some states have enacted legislation which directly mandates the payment of
tipping fees. Other states have implemented programs which make funds available
for the payment of tipping fees. For instance, some states raise funds, through
retail taxes on purchases of new tires or through annual motor vehicle license
fees, which are specifically allocated to the disposal of tires. These states
often bear the responsibility for disposing of tires directly and use the funds
raised from the net proceeds of the particular program to pay for such disposal.
Other states provide for a tax to be paid by purchasers of new tires, to be
retained by the retailer selling the tire, who must in turn pay for the disposal
of such scrap tires. Other states rely on the market to regulate tipping fees.
We estimate that in large urban cities, average tipping fees could be as much as
U.S. $3.00 to $5.00 per tire. In our financial projection, we have budgeted
tipping fees at U.S. $0.85 per tire.
Sale of the Recovered Steel
Approximately one pound of steel can be recovered from each scrap passenger
tire. Scrap steel can be used as an input into carbon steel manufactured by
steel mills. A recent expansion of the number of small-scale "mini" mills
19
catering to local markets has increased local demand for scrap steel. Scrap
steel is also sold into export markets, notably Japan. International demand for
United States scrap steel has had a positive impact on the demand for and price
of scrap steel. Although the U.S. steel industry is in decline, demand for scrap
steel remains significant with regional prices varying from U.S. $65.00 to
$124.00 per ton. In our financial projections, the realizable price for scrap
steel produced was budgeted at U.S. $65.00 per ton. Based on inputs of 4,600,000
tires annually, each ARC Unit will be designed to produce approximately 2,300
tons of scrap steel per year.
Sale of the Manufactured Carbon Black
As the rubber is thermally reduced to fuel oil, approximately 14 million pounds
of commercial grade carbon black is expected to be manufactured. Carbon black
can be sold to industry for reuse as a re-enforcing agent in synthetic rubber
compounds for inks, paints, plastics, radiator hoses, fan belts, trim rubber,
floor mats, etc. Because the principal use of carbon black is as a raw material
in automotive parts, demand for carbon black is dependent on the automotive
industry. Also, since carbon black is derived from petrochemical products, its
price is susceptible to variations in the price of oil. A U.S. chemical company
quoted a price of U.S. $0.425 per pound for an equivalent grade carbon black,
effective April 1, 2002. The manufactured price of carbon black is directly
related to the price of a barrel of oil. In our financial projections, the
realizable price for carbon black produced was budgeted at U.S. $0.22 per pound.
Based on inputs of 4.6 Million tires annually, each ARC Unit is designated to
produce approximately 14 million pounds of carbon black per year.
Sale of Steam and/or Hot Water
Steam and/or hot water can be sold to industry or greenhouse operators at the
avoided cost.
Consulting Agreement with Mirador Consulting, Inc.
We have a consulting agreement with Mirador Consulting, Inc. to provide
management consulting, business advisory, shareholder information and public
relations and other related services as needed. The agreement commenced on
January 14, 2004 and shall terminate on January 14, 2005. Under this agreement,
we issued 200,000 shares of our restricted common stock with a fair market value
of $100,000 to Mirador. We will also pay Mirador a monthly fee of $4,000.00 per
month. Mirador will also have the right to purchase 100,000 shares of our common
stock at a price of $5.00 per share for a period of three years. Finally,
Mirador will also have the right to purchase 100,000 shares of our common stock
at a price of $7.50 per share for a period of three years.
Intellectual Property
The necessary technology that is required for our operation is presently owned
by Peter Vaisler. While employed by us, Mr. Vaisler will provide us with such
technology at no cost to us until the end of his employment term. In the event
Mr. Vaisler is no longer employed by us, the technology that he has provided to
us may be used by us for a one time fee equal to the current replacement value
of such technology determined by an engineer's opinion acceptable to both
parties. We may terminate Mr. Vaisler's employment agreement for "cause." Either
party may terminate the employment agreement with thirty (30) days prior written
notice to the other party.
We presently have no copyrights, patents or trademarks.
EMPLOYEES
As of December 20, 2004, we had no employees. However, we expect to employ
approximately 25 people on a full-time basis at our first installation and 6
employees to support corporate activities. We will employ additional people as
we continue to implement our plan of operation.
DESCRIPTION OF PROPERTY
At present, we do not own or lease any property. Our President, Mr. Vaisler uses
various offices including, his home office and the offices of legal counsel at
no cost to us.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. We are not aware of any
contemplated proceeding by a governmental authority. Also, we do not believe
that any director, officer, or affiliate, any owner of record or beneficially of
more than five percent of our outstanding common stock, or security holder, is a
party to any proceeding in which he or she is a party adverse to us or has a
material interest adverse to us.
20
MANAGEMENT
DIRECTORS & EXECUTIVE OFFICERS
The following table sets forth information about our executive officers and
directors.
Name Age Position
Peter Vaisler 54 Director, President & CEO
David Williams 62 Director
Walter Martin 62 Director
Peter Vaisler has been the President, CEO and Director of Alliance Recovery
Corporation since inception November 2001. Since 1995, Mr. Vaisler and a team of
third party engineers and scientists have been working to develop the ARC Unit
by integrating existing manufacturing and energy components into a single
process system to thermally reduce waste rubber to a fuel oil for use as a
feedstock to generate electricity. Using knowledge gleaned from research and
development projects by several U.S. and international groups, Mr. Vaisler and
his team applied existing chemical manufacturing processes to thermally reduce
rubber to fuel oil for energy production. A by-product of the ARC thermal
reduction of rubber to fuel oil is a commercial grade of carbon black. Mr.
Vaisler and his team also developed and implemented strategies related to site
selection, regulatory affairs, permitting and communications with a view to
refining the business concept to the point that installation of the ARC Unit
could be accomplished in various U.S. jurisdictions. Mr. Vaisler managed the
engineering team and coordinated design and fabrication activities addressing
technical refinements to the integration of "off-the-shelf" system components
that will be purchased by Alliance for the first installation.
From 1979 to 1985, Mr. Vaisler was a senior executive responsible for project
management with a Canadian food manufacturer coordinating the design,
installation, and start-up of a new manufacturing process, including conveyance
and packaging machinery innovations. As a Project Manager, Mr. Vaisler
coordinated the activities of European based engineers & fabricators, and North
American contractors in connection with the use of fractional evaporators for
manufacture of fruit and berry concentrates.
From 1986 to 1989, Mr. Vaisler was a corporate planning consultant assisting
technology based industries and health care institutions with the
commercialization of technological innovations. As part of his responsibilities,
Mr. Vaisler initiated technical and business activities pertaining to biomedical
waste disposal utilizing "state-of-the-art" incinerators. His interest in the
thermal reduction of rubber waste to fuel oil commenced during this period in
his career.
In November 1989, Mr. Vaisler joined Conjoint Export Services. As Director of
International Trade Development for a Canadian and U.S. initiative, he provided
export market management services to primarily technology based manufacturers
seeking both export and import market growth. Mr. Vaisler commenced his
activities pertaining to the development of the ARC Unit in 1994. Mr. Vaisler
obtained a Bachelor of Arts degree from the University of Western Ontario in
1974.
David Williams has been our director since 2004. He has business experience in
the area of Investment Management. Mr. Williams graduated from Bishops
University in Quebec, Canada in 1963 with a Bachelor of Business Administration,
gaining his Masters in Business Administration from Queens' University in
Kingston, Ontario in 1964 and later was a recipient of a Doctor of Civil Laws
from Bishops in 1996.
21
David Williams has been involved in the investment management business for over
30 years with experience in corporate finance. David began his career in the
investment business as a bond and money market trader. From 1966, he acted as an
investment analyst and portfolio manager with Hodgson, Roberton, Laing and
Company, one of Canada's oldest investment counseling firms. Mr. Williams'
responsibilities included; equity and fixed income analysis and management of
personal investment portfolios. In 1966 David joined, and later became a senior
partner of, Beutel Goodman and Company, a value management company dealing in
equity and fixed income assets, with $30 million under management. Mr. Williams,
along with several partners, successfully built the company to the point where
it had $11.6 billion under management in 1993. David's responsibilities over the
years have included managing substantial institutional portfolios as well as
extensive marketing and client liaison work with many of the firms' most
important clients demonstrating a large capacity for managing large portfolios.
Mr. Williams currently includes charitable and special interests programs in his
daily activities while remaining on the Board of Directors of such companies as:
Bennett Environmental Inc. (TSX listed) ) which specializes in thermal treatment
of contaminated soil; MetroOne Telecommunications Inc. (NASDAQ listed) which
provides major telephone companies with enhanced directory services; and ReFocus
Group Inc. (OTC BB listed) which is a medical treatment device company
specializing in vision disorders.
Mr. Williams' past directorships include: Drug Royalty Corporation Inc. which
specializes in medical devices and pharmaceutical products; Equisure Financial
Inc., a company involved in general and life insurance as well as financial
planning; and Duff & Phelps LLC, a NASDAQ listed company with interest in middle
market mergers and acquisitions.
Mr. Williams currently continues to manage Roxborough Holdings Ltd., a family
owned private equity holding company which is an equity investor in a variety of
private and public companies.
Walter Martin has been our director since 2004. Walter Martin brings more than
two decades of corporate finance experience to the Company. Mr. Martin began his
career with Versatile Investments before moving to Brightside Financial
Corporation. In 1983 as one of three founders of Brightside Financial Mr. Martin
helped built the Company to hold over 160 sales advisors administering over $1
Billion when it was sold to Assante Corporation. Mr. Martin continued to work
for Assante Corporation after its buyout by Brightside until its full
integration. From 1996 to 2002, Mr. Martin acted as Vice President of Assante
Corp., a financial planning firm based in Canada. Mr. Martin currently sits as a
member on the board of three companies in the software and mutual fund
industries, as well as a charitable company serving refugees.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
Summary Compensation Table. The following table sets forth information
concerning the annual and long-term compensation awarded to, earned by, or paid
to the named executive officer for all services rendered in all capacities to
our company, or any of its subsidiaries, for the years ended December 31, 2003,
2002 and 2001:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
--------------------------------------- -------------------------------------------
Securities
Restricted Securiites
Name and Other Annual Stock Underlying
Principal Position Year Salary* Bonus Compensation Award(s) Options
- ------------------------------------------------------------------------------------------------------------
Peter Vaisler (1) 2003 $ 250,000 -0- -0- -0- -0-
2002 $ 250,000 -0- -0- -0- -0-
CEO & President 2001 $ 20,883 -0- -0- -0- -0-
* Represents non-salary compensation pursuant to Mr. Vaisler's consulting
agreement with us.
(1) In 2004, Mr. Vaisler was also entitled to compensation of $250,00 per year
based on his consulting agreement with us.
22
Option Grants Table. The following table sets forth information concerning
individual grants of stock options to purchase our common stock made to the
executive officer named in the Summary Compensation Table during fiscal 2003 and
2004 to date.
OPTIONS GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of securities Percent of total
underlying options options granted to Exercise or base
granted employees in last price Expiration
Name (#) fiscal year ($/Share) Date
- -----------------------------------------------------------------------------------------
Peter Vaisler -0- N/A N/A N/A
Aggregated Option Exercises and Fiscal Year-End Option Value Table. The
following table sets forth certain information regarding stock options exercised
during fiscal 2003 and 20004 to date, by the executive officer named in the
Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
at Fiscal at Fiscal
Year-End(#) Year-End($)(1)
------------- --------------
Shares acquired on Exercisable/ Exercisable/
Name exercise (#) Value realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------
Peter Vaisler -0- N/A -0- -0-
Employment Agreement
We have a five-year employment agreement with Mr. Vaisler to act as our
President and Chief Executive Officer on a full-time basis. The agreement will
commence on the date that this SB-2 Registration Statement is declared effective
by the SEC and will expire five years from such date. The annual base salary is
$250,000 with additional cash compensation as defined in the agreement. He also
receives an automobile allowance, and we shall use our best efforts to maintain
Director's and Officer's liability insurance. We will also provide contributions
to any self-directed employee benefit plan. While employed by us, Mr. Vaisler
will provide us with certain technology at no cost to us until the end of the
employment term. In the event Mr. Vaisler is no longer employed by us, the
technology that he has provided to us may be used by us for a one time fee equal
to the current replacement value of such technology determined by an engineer's
opinion acceptable to both parties. We may terminate Mr. Vaisler's employment
agreement for "cause." Either party may terminate the employment agreement with
thirty (30) days prior written notice to the other party.
Consulting Agreement
We have a consulting agreement with Peter Vaisler, who is also our President and
Chief Executive Officer. The consulting agreement calls for Mr. Vaisler to
provide technology that he has developed for us, along with the use of his
know-how and industry contacts to facilitate the realization of our business
objectives. Mr. Vaisler will be paid U.S.$250,000 annually for his consulting
services. The consulting agreement commenced on December 1, 2001 and expires on
December 1, 2006. Upon the commencement of Mr. Vaisler's employment agreement
set forth above (when this SB-2 registration statement is declared effective by
the SEC), the consulting agreement shall terminate.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their
services as directors. The Board of Directors has the authority to fix the
compensation of directors. No amounts have been paid to, or accrued to,
directors in such capacity.
23
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information derived from the named
person, or from our corporate records , concerning the ownership of common stock
as of December 20, 2004, of (i) each person who is known to us to be the
beneficial owner of more than 5 percent of the common stock; (ii) all directors
and executive officers; and (iii) directors and executive officers as a group:
Name and address of Beneficial Owner Amount and Nature of Percent of Total
Beneficial Ownership Ownership
- ------------------------------------------------- ------------------------- -----------------------
Peter Vaisler (1) 7,750,000 42.33%
1133 St. Anthony Road
London, Ontario, Canada N6H 2P9
David Williams (2) 2,800,000 15.29%
45 St. Claire Avenue West, Suite 1202
Toronto, ON M4V 1K9
Walter Martin 240,000 1.31%
20 Sandpiper Ct.,
Elmira, ON N3B 3C5
Suzy Jafine (In Trust) 1,450,000 7.92%
80 West Dr.
Brampton, ON L6T 3T6
Saul Brothers Partnership 1,450,000 7.92%
2802 Sundown Ln., No. 210
Boulder, CO 80303
Duffy Herman & Tricia Morris 1,450,000 7.92%
1001 Kupulau Drive
Khei, HI 96753
Executive Officers and 10,790,000 58.93%
Directors as Group
(3 Person)
(1) Mr. Vaisler owns his shares through Emerald City Corporation, S.A., a
corporation domiciled in Costa Rica.
(2) Mr. Williams owns his shares through Roxborough Holdings Limited, a
corporation domiciled in Ontario, Canada.
SELLING STOCK HOLDERS
All of the stock owned by all of the selling stock holders including David
Williams, our director will be registered by the registration statement of which
this prospectus is a part of. The selling stock holders may sell some or all of
their shares immediately after they are registered. In the event that the
selling security holders sell some or all of their shares, trading prices for
the shares could fall below the offering price of the shares.
The selling stock holders shares may be sold or distributed from time to time by
the selling stock holders or by pledges, donees or transfers of, or successors
in interest to, the selling stockholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers, or underwriters who may act
solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the shares may be affected in one or more of the following
methods:
- - ordinary broker transactions, which may include long and short sales,
- - transactions involving cross or block trades in any securities or market
where our common stock is trading,
- - purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus, or
through market makers or into an existing market for the common stock,
- - in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
- - through transactions in swaps or other derivatives (whether exchange listed
or otherwise), or
- - any combination of the foregoing, or by any other legally available means.
24
In addition, the selling stock holders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stock holders may also enter into opinion or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in their form of discounts, concessions or
commissions from the selling stock holders and/or the purchasers of shares for
whom such broker/dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stock holders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2 (11) of the Securities Act 1933,
and any commissions received by them and any profit realizing by them on the
resale of shares as principals may be deemed underwriting compensation under the
Securities Act 1933. Neither the selling stock holders or us can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stock holders and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the selling
stock holders pursuant to this prospectus. We have agreed to bear the reasonable
expenses of the registration of the shares, including legal and accounting fees.
Name of Selling stockholder Shares of Percent of Shares of the Number of Percent of
Common Stock common common stock to shares owned shares owned
owned prior to shares owned be sold in the after the after
Offering (2) prior to the offering offering offering (3)
offering
- ------------------------------ ----------------- -------------- ----------------- ---------------- --------------
Dora Vaisler (1) 300,000 1.64% 300,000 0 0
Liliana LaCavera 35,100 .19% 35,100 0 0
Filomena Meffe 163,100 .89% 163,100 0 0
1064055 Ontario Inc. c/o 220,500 1.20% 220,500 0 0
William Daniell
Suzy Jafine (in trust) 1,450,000 7.92% 200,000 1,250,000 6.08%
Saul Brothers Partnership 1,450,000 7.92% 200,000 1,250,000 6.08%
Duffy Herman & Tricia Morris 1,450,000 7.92% 200,000 1,250,000 6.08%
Renzo Marrone 22,050 .12% 22,050 0 0
Aurelio Marrone 22,050 .12% 22,050 0 0
Jonah Murakami 75,000 .40% 75,000 0 0
Kenneth Hurrell 100,000 .55% 100,000 0 0
Robert Lisser 360,000 1.97% 360,000 0 0
Roxborough Holdings Limited 2,800,000 15.29% 400,000 2,600,000 12.64%
(4)
8,447,800 2,297,800
TOTAL
(1) Dora Vaisler is Peter Vaisler's mother.
(2) Based on 18,309,156 shares issued and outstanding as of December 20,
2004.
(3) Based on 20,563,085 shares issued and outstanding as of December 20,
2004 assuming the exercise of the 2,253,929 warrants being registered
in this registration statement.
(4) Roxborough Holdings Inc. is controlled by our director, David
Williams. Roxborough holds 2,800,000 shares of our common stock and
200,000 warrants. We are registering 200,000 shares and 200, 000
shares issuable in connection with the conversion of his 200,000
warrants.
25
The following selling shareholders own an equal amount of warrants which entitle
such shareholders to purchase one share of common stock for each warrant held.
We are registering all the shares of our common stock held by the selling
stockholders and common stock underlying each warrant held by the selling
stockholders.
Name of Selling stockholder Shares of Percent of Shares of the Number of Percent of
Common Stock common common stock to shares owned shares owned
owned prior to shares owned be sold in the after the after offering
Offering prior to the offering offering
offering (2)
- ------------------------------ ----------------- -------------- ----------------- --------------- ---------------
Mirador Consulting Inc. 200,000 1.10% 400,000 0 0
Brawley Cathers Limited 100,000 .55% 200,000 0 0
John F. Hondzel 7,000 .04% 14,000 0 0
Diane Carol Uptigrove 12,500 .07% 25,000 0 0
Paul Gordon Uptigrove 12,500 .07% 25,000 0 0
Peter Keegan 4,000 .02% 8,000 0 0
Bruce W. Lyle 1,500 .01% 3,000 0 0
Greg Steven & Elinor Lynn 4,000 .02% 8,000 0 0
Evans
Woyciech Dobkowski 2,000 .01% 4,000 0 0
Paula M. Heard 2,000 .01% 4,000 0 0
James Coghlan 5,000 .03% 10,000 0 0
Barbara Joan Coghlan 11,000 .06% 22,000 0 0
Frederik John Schuringa 2,000 .01% 4,000 0 0
Grant Douglas McKinnell 4,000 .02% 8,000 0 0
Neil Douglas McKinnell 4,000 .02% 8,000 0 0
Ruby Chicks Investment Inc. 5,000 .03% 10,000 0 0
Alfred Pettersen 2,000 .01% 4,000 0 0
Harold E. Thomson 4,000 .02% 8,000 0 0
Willie E. Wright 2,000 .01% 4,000 0 0
Arlene Woolcox 2,000 .01% 4,000 0 0
Nicolas M. Woolcox 2,000 .01% 4,000 0 0
Christopher A. Woolcox 1,000 .01% 2,000 0 0
Shaun Woolcox 2,000 .01% 4,000 0 0
Robert Orlo Woolcox 2,000 .01% 4,000 0 0
Gordon O'Neil & Crystal Lee 12,500 .07% 25,000 0 0
Smith
Steven Maste 1,580 .01% 3,160 0 0
Gary Bernhard & Margaret Ann 6,000 .03% 12,000 0 0
Ostby
Gary Ostby 13,000 .07% 26,000 0 0
Margaret Ostby 13,000 .07% 26,000 0 0
Tina Raiche - Burchell 4,000 .02% 8,000 0 0
Randy & Diane Elms 1,000 .01% 2,000 0 0
Michael F. Caputo 21,000 .11% 42,000 0 0
874297 Ontario Ltd. 5,000 .03% 10,000 0 0
Frank Toonders 6,000 .03% 12,000 0 0
David Goodhand 2,000 .01% 4,000 0 0
Czeslaw Landowski 4,000 .02% 8,000 0 0
Diana Letourineau 5,000 .03% 10,000 0 0
William J. Loyens 2,500 .01% 5,000 0 0
26
John Peter Loyens 9,000 .05% 18,000 0 0
Lynn Schmidt 5,000 .03% 10,000 0 0
Jennifer Lamarche Schmalz 1,500 .01% 3,000 0 0
Lori Bowman 2,000 .01% 4,000 0 0
Joyce Lamarche 3,000 .02% 6,000 0 0
Robert G. Maloley 6,000 .03% 12,000 0 0
Frank Melo 5,000 .03% 10,000 0 0
Richard John Tusch 7,000 .04% 14,000 0 0
Eleanor Lukings 2,000 .01% 4,000 0 0
823284 Ontario Inc. 7,920 .04% 15,840 0 0
Ron Swaddling 5,000 .03% 10,000 0 0
Kareen L. Caputo 5,000 .03% 10,000 0 0
Jane Gowing & Karen Faguy 5,000 .03% 10,000 0 0
Elliot Strashin 3,000 .02% 6,000 0 0
Mary Dider 3,000 .02% 6,000 0 0
Eagle Visions Securities 100,000 .55% 200,000 0 0
Corp.
Donna Grills 40,000 .22% 80,000 0 0
David John Fisher 26,000 .14% 52,000 0 0
Jurek Gebczynski 20,000 .11% 40,000 0 0
Rebecca McKinnon 20,000 .11% 40,000 0 0
Jewan Naraine 120,000 .66% 240,000 0 0
Geary Naraine 120,000 .66% 240,000 0 0
Cridon Investments Limited 40,000 .22% 80,000 0 0
Daniel Carraro 20,000 .11% 40,000 0 0
Ellis Burrows 12,710 .07% 25,420 0 0
Lorna K. Benson 20,000 .11% 40,000 0 0
Sheldon Earnest Benson 40,000 .22% 80,000 0 0
Donald Gerald Triebner 20,000 .11% 40,000 0 0
Lewis Martin 40,000 .22% 80,000 0 0
Brian Carr 45,000 .25% 90,000 0 0
Deborah J. Harris 5,000 .03% 10,000 0 0
Peter G. Millar 2,000 .01% 4,000 0 0
Christopher P. Arnot 3,000 .02% 6,000 0 0
Henry Guetter 24,000 .13% 48,000 0 0
Hank Van Burgsteden 4,000 .02% 8,000 0 0
Boguslaw Dudziak 4,000 .02% 8,000 0 0
Wim Van Burgsteden 10,000 .05% 20,000 0 0
Donald Degraw 4,000 .02% 8,000 0 0
Joseph A. Stachura 4,000 .02% 8,000 0 0
Douglas Lloyd Smith 10,000 .05% 20,000 0 0
Randy Stachura 4,000 .02% 8,000 0 0
Steven Azmier and Susan 50,000 .27% 100,000 0 0
Vaisler
Robert John Shea 40,000 .22% 80,000 0 0
Robert John Shea, in trust 10,000 .05% 20,000 0 0
for Matthew and Victoria Shea
27
Kevin Francis McFall 10,000 .05% 20,000 0 0
Narais N. Mangal 10,000 .05% 20,000 0 0
Pamela Gowing 1,000 .01% 2,000 0 0
Dr. Lance Appleford 10,000 .05% 20,000 0 0
Andre Paul Lechner 12,000 .06% 24,000 0 0
Douglas B. Lawrence 3,000 .02% 6,000 0 0
Rod Robinson 140,000 .76% 280,000 0 0
Elle Lee Inc. 6,000 .03% 12,000 0 0
Shannon M. Pringle 10,000 .05% 20,000 0 0
Joy A. Smith 6,000 .03% 12,000 0 0
Richard Tonita 20,000 .11% 40,000 0 0
Grant Allan Grobman 15,000 .08% 30,000 0 0
Salim Sitabkhan 10,000 .05% 20,000 0 0
Rashelle Babij 7,587 .04% 15,174 0 0
Charles David Macdonald 8,000 .04% 16,000 0 0
Julie A. & Gary G. Sikorski 4,000 .02% 8,000 0 0
Glen D. Kilback 6,000 .03% 12,000 0 0
John Burchell 8,000 .04% 16,000 0 0
William Scott Machesney 10,000 .05% 20,000 0 0
1571469 Ontario Inc. c/o 20,000 .11% 40,000 0 0
Jamie Wilson
Ronald A. Hillman 31,000 .17% 62,000 0 0
Robert W. Hillman 31,000 .17% 62,000 0 0
Karen Lee Degraw 6,000 .03% 12,000 0 0
Nadene Anne McKinnell 6,000 .03% 12,000 0 0
Tony & Louise Van Wyngaarden 10,000 .05% 20,000 0 0
John D. Rumsam 6,000 .03% 12,000 0 0
James Barry LaChance 4,559 .02% 9,118 0 0
John D. Arlinghaus 2,000 .01% 4,000 0 0
Envo Tech. Inc. 20,000 .11% 40,000 0 0
Randall Sinclair 6,000 .03% 12,000 0 0
Pamela J. Boyd 10,000 .08% 20,000 0 0
Equity Trust, Custodian FBO
Pamela Boyd IRA
Mark E. Wernet 3,000 .02% 6,000 0 0
Cecilia Wernet 2,000 .01% 4,000 0 0
1451624 Ontario Inc. (1) -0- 0 382,573
TOTAL 1,871,356 3,742,712
The following selling shareholder only owns warrants which entitle such
shareholder to purchase one share of common stock for each warrant held.
1451624 Ontario Inc. (1) -0- 0 382,573 0 0
Total -0- 382,573
(1) 1451624 Ontario Inc. owns -0- shares and 382,573 warrants convertible
into 382,573 shares of our common stock. All of the shares underlying
the warrants are being registered.
(2) Based on 18,309,156 shares issued and outstanding as of December 20,
2004.
28
PLAN OF DISTRIBUTION
The selling stockholders may effect the distribution of the shares in one or
more transactions that may take place through block trades or ordinary broker's
transactions, or through privately negotiated transactions, an underwritten
offering, or a combination of any such methods of sale. Sales of shares will be
made at market prices prevailing at the time or at negotiated prices. Selling
stockholders may pay unusual and customary or specifically negotiated brokerage
fees or commissions in connection such sales. We have agreed to pay registration
expenses incurred in connection with this registration.
The aggregate proceeds to the Selling stockholders from the sale of the shares
will be the purchase price of our common stock sold less the aggregate agents'
commissions and underwriters' discounts, if any. The selling stockholders and
any dealers or agents that participate in the distribution of the shares may be
deemed to be "underwriter" within the meaning of the Securities Act of 1933 (the
"Act"), and any profit from the sale of shares by them and any commissions
received by any such dealers or agents might be deemed to be underwriting
discounts and commissions under the Act.
Under the Securities Exchange Act of 1934, as amended, and the regulations
thereunder, any person engaged in a distribution of the shares of our common
stock offered by this prospectus may not simultaneously engage in market making
activities with respect to our common stock during the applicable "cooling off"
periods prior to the commencement of such distribution. Also, the selling
security holders are subject to applicable provisions which limit the timing of
purchases and sales of our common stock by the selling stockholders.
We have informed security holders that, during such time as they may be engaged
in a distribution of any of the shares we are registering by this registration
statement, they are required to comply with Regulation M. In general, Regulation
M precludes any selling security holder, any affiliated purchasers and any
broker-dealer or any other person who participates in a distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase, any security which is the subject of the distribution until the entire
distribution is complete. Regulation M defines a "distribution" as an offering
of securities that is distinguished form ordinary trading efforts and selling
methods. Regulation M also defines a "distribution participant" as an
underwriter, prospective underwriter, broker, dealer, or other person who has
agreed to participate in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of the security, except
as specifically permitted by Rule 144 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
stockholders that stabilizing transactions permitted by Regulation M allow bids
to purchase our common stock of the stabilizing bids do not exceed a specified
maximum. Regulation M specifically prohibits stabilizing that is the result of
fraudulent, manipulative, or deceptive practices. Selling stockholders and
distribution participants are required to consult with their own legal counsel
to ensure compliance with Regulation M.
In order to comply with the securities laws of certain states, if applicable,
the securities may be sold only through registered or licenses brokers or
dealers. In addition, in certain states, the securities may not be sold unless
they have been registered or qualified for sale in such state or any exemption
from such registration or qualification requirement is available and the sale is
made in compliance with the requirements.
We have agreed to indemnify the selling stockholders in certain circumstances,
against certain liabilities arising under the Act. The selling stockholders have
agreed to indemnify Nationwide and our directors and officers who sign the
registration statement against certain liabilities, including liabilities
arising under the Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have a five-year employment agreement with Peter Vaisler, our CEO and
President, to act as our President and Chief Executive Officer on a full-time
basis. The agreement will commence on the date that this SB-2 Registration
Statement is declared effective by the SEC and will expire five years from such
date. While employed by us, Mr. Vaisler will provide us with certain technology
at no cost to us until the end of the employment term. In the event Mr. Vaisler
is no longer employed by us, the technology that he has provided to us may be
used by us for a one time fee equal to the current replacement value of such
technology determined by an engineer's opinion acceptable to both parties. We
may terminate Mr. Vaisler's employment agreement for "cause." Either party may
terminate the employment agreement with thirty (30) days prior written notice to
the other party.
29
We also have a consulting agreement with Mr. Vaisler. The consulting agreement
calls for Mr. Vaisler to provide technology that he has developed for us, along
with the use of his know-how and industry contacts to facilitate the realization
of our business objectives. The consulting agreement commenced on December 1,
2001 and expires on December 1, 2006. Upon the commencement of Mr. Vaisler's
employment agreement set forth above (when this SB-2 registration statement is
declared effective by the SEC), the consulting agreement shall terminate.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
GENERAL
Common Stock
As of December 20,, 2004, we had 18,309,156, shares of $0.01 par value common
stock were issued and outstanding. We are presently authorized to issue up to
100,000,000 shares of $0.01 par value common stock.
Holders of common stock are entitled to one vote for each share of common stock
owned of record on all matters to be voted on by stockholders, including the
election of directors. The holders of common stock are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors, in its discretion, from funds legally available. The common stock has
no preemptive or other subscription rights, and there are no conversion rights
or redemption provisions. All outstanding shares of common stock are validly
issued, fully paid and non-assessable.
Preferred Stock
We have no preferred stock authorized.
Warrants
As of December 20, 2004, we have 2,253,929 warrants outstanding. Each warrant
entitles the warrant holder to one share of our common stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
During the two most recent fiscal years and interim period subsequent to
December 31, 2003, there have been no disagreements with Webb & Company, P.A.,
our independent auditor, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
TRANSFER AGENT
We intend to hire a transfer agent prior to the effectiveness of this
registration statement.
EXPERTS
The financial statements included in this prospectus have been audited by Webb
and Company, P.A., Certified Public Accountant, independent auditors, as stated
in their report appearing herein and elsewhere in the registration statement
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to our recurring losses from operations which raise
substantial doubt about our ability to continue as a going concern), and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of our common shares offered will be passed upon for us by Anslow &
Jaclin, LLP, 195 Route 9 South, Suite 204, Manalapan, New Jersey 07726.
30
FINANCIAL STATEMENTS
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
PAGE 2 CONDENSED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003 AND FOR THE PERIOD FROM NOVEMBER
6, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 (UNAUDITED)
PAGES 3 CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO
SEPTEMBER 30, 2004 (UNAUDITED)
PAGE 4 CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003 AND FOR THE PERIOD FROM NOVEMBER
6, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 (UNAUDITED)
PAGES 5 - 9 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
AS OF SEPTEMBER 30, 2004 AND 2003
---------------------------------
(UNAUDITED)
ASSETS
------
2004 2003
---------------- --------------
CURRENT ASSETS
Cash $ 157,885 $ 110,960
PROPERTY AND EQUIPMENT, NET 9,425 -
---------------- --------------
TOTAL ASSETS $ 167,310 $ 110,960
- ------------ ================ ==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 304,374 $ 276,333
---------------- --------------
TOTAL CURRENT LIABILITIES 304,374 276,333
STOCKHOLDERS' DEFICIENCY
Common stock, $0.01 par value, 100,000,000 shares authorized,
18,309,156 and 17,263,510 shares issued and outstanding, respectively 183,091 172,635
Additional paid in capital 1,111,751 599,384
Subscriptions receivable (17,877) (39,106)
Deferred compensation (29,108) -
Accumulated deficit during development stage (1,384,921) (898,286)
---------------- --------------
Total Stockholders' Deficiency (137,064) (165,373)
---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 167,310 $ 110,960
- ---------------------------------------------- ================ ==============
See accompanying notes to condensed financial statements.
1
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(UNAUDITED)
For the Period
from
For the Nine For the Nine November 6, 2001
Months Ended Months Ended (Inception) to
September 30, 2004 September 30, 2003 September 30, 2004
-------------------- ------------------- ----------------------
OPERATING EXPENSES
Consulting expense $ 290,192 $ 296,250 $ 1,134,980
Professional fees 52,148 9,668 166,128
General and administrative 37,815 5,224 83,813
------------ ------------ ------------
Total Operating Expenses 380,155 311,142 1,384,921
------------ ------------ ------------
NET LOSS $ (380,155) $ (311,142) $ (1,384,921)
============ ============ ============
Net loss per share - basic and diluted $ (0.02) $ (0.02) $ (0.08)
============ ============ ============
Weighted average number of shares outstanding during the
period - basic and diluted 18,003,967 17,047,221 17,098,076
============ ============ ============
See accompanying notes to condensed financial statements.
2
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO SEPTEMBER 30, 2004
----------------------------------------------------------------------
(UNAUDITED)
Additional
Common Stock Paid-In Subscription
Shares Amount Capital Receivable
----------- ----------- ----------- -----------
Common stock issued to founders for services ($0.01 per share) 8,410,000 $ 84,100 $ -- $ --
Common stock issued for cash ($0.0137 per share) 7,687,800 76,878 28,186 (105,064)
Net loss for the period from November 6, 2001 (inception) to
December 31, 2001 -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2001 16,097,800 160,978 28,186 (105,064)
Common stock with warrants issued for services ($0.50 per share) 112,710 1,127 55,228 --
Common stock issued for services ($0.50 per share) 100,000 1,000 49,000 --
Common stock with warrants issued for cash ($0.50 per share) 296,000 2,960 145,040 (40,000)
Collection of subscriptions receivable -- -- -- 56,290
Net loss, 2002 -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2002 16,606,510 166,065 277,454 (48,774)
Amortization of deferred compensation -- -- -- --
Common stock with warrants issued for cash ($0.50 per share) 1,322,646 13,226 648,097 (160,968)
Net loss, 2003 -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2003 17,929,156 $ 179,291 $ 925,551 $ (209,742)
Common stock and warrants issued for cash ($0.50 per share) 180,000 1,800 88,200 --
Common stock issued for services ($0.50 per share) 200,000 2,000 98,000 --
Common stock warrants issued for services -- -- -- --
Collection of subscriptions receivable -- -- -- 191,865
Net loss for the nine months ended September 30, 2004 -- -- -- --
----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 2004 18,309,156 $ 183,091 $ 1,111,751 $ (17,877)
- --------------------------- =========== =========== =========== ===========
Accumulated
Deficit During
Deferred Stock Development
Compensation Stage Total
----------- ----------- -----------
Common stock issued to founders for services ($0.01 per share) $ -- $ -- $ 84,100
Common stock issued for cash ($0.0137 per share) -- -- --
Net loss for the period from November 6, 2001 (inception) to
December 31, 2001 -- (104,933) (104,933)
----------- ----------- -----------
Balance, December 31, 2001 -- (104,933) (20,833)
Common stock with warrants issued for services ($0.50 per share) (27,083) -- 29,272
Common stock issued for services ($0.50 per share) (16,667) -- 33,333
Common stock with warrants issued for cash ($0.50 per share) -- -- 148,000
Collection of subscriptions receivable -- -- 56,290
Net loss, 2002 -- (482,211) (482,211)
----------- ----------- -----------
Balance, December 31, 2002 (43,750) (587,144) (236,149)
Amortization of deferred compensation 43,750 -- 43,750
Common stock with warrants issued for cash ($0.50 per share) -- -- 500,355
Net loss, 2003 -- (417,622) (417,622)
----------- ----------- -----------
Balance, December 31, 2003 $ -- $(1,004,766) $ (109,666)
Common stock and warrants issued for cash ($0.50 per share) -- -- 90,000
Common stock issued for services ($0.50 per share) (29,108) -- 70,892
Common stock warrants issued for services -- -- --
Collection of subscriptions receivable -- -- 191,865
Net loss for the nine months ended September 30, 2004 -- (380,155) (380,155)
----------- ----------- -----------
BALANCE, SEPTEMBER 30, 2004 $ (29,108) $(1,384,921) $ (137,064)
- --------------------------- =========== =========== ===========
See accompanying notes to condensed financial statements.
3
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
(UNAUDITED)
For the Period
from November 6,
For the Nine For the Nine 2001 (Inception)
Months Ended Months Ended to September 30,
September 30, 2004 September 30, 2003 2004
-------------------- ------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (380,155) (311,142) (1,384,921)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock issued for services 70,692 43,750 261,147
Depreciation expense 1,741 -- 1,741
Changes in operating assets and liabilities:
Accounts payable and accrued expenses 1,971 49,500 304,374
---------- ---------- ----------
Net Cash Used In Operating Activities (305,751) (217,892) (817,659)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,166) -- (11,166)
---------- ---------- ----------
Net Cash Used In Investing Activities (11,166) -- (11,166)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft -- (9,316) --
Proceeds from issuance of common stock 282,065 338,168 986,710
---------- ---------- ----------
Net Cash Provided By Financing Activities 282,065 328,852 986,710
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (34,852) 110,960 157,885
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 192,737 -- --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 157,885 110,960 157,885
========== ========== ==========
See accompanying notes to condensed financial statements.
4
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 AND 2004
---------------------------------
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
- ------ -----------------------------------------------------------
(A) Basis of Presentation
--------------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted in The
United States of America and the rules and regulations of the Securities
and Exchange Commission for interim financial information. Accordingly,
they do not include all the information necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statements presentation. The results for the
interim period are not necessarily indicative of the results to be expected
for the year.
(B) Use of Estimates
---------------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reported period.
Actual results could differ from those estimates.
(C) Loss Per Share
-------------------
Basic and diluted net loss per common share is computed based upon the
weighted average common shares outstanding as defined by Financial
Accounting Standards No. 128, "Earnings Per Share." As of September 30,
2004 and 2003, common share equivalents were anti-dilutive and not used in
the calculation of diluted net loss per share.
(D) Business Segments
--- -----------------
The Company operates in one segment and therefore segment information is
not presented.
NOTE 2 STOCKHOLDERS' EQUITY
- ------ --------------------
(A) Common Stock Issued to Founders
------------------------------------
During 2001, the Company issued 8,410,000 shares of common stock to
founders for services with a fair value of $84,100 ($0.01 per share).
5
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 AND 2004
---------------------------------
(UNAUDITED)
(B) Common Stock and Warrants Issued for Cash
----------------------------------------------
During 2001, the Company received subscriptions receivable of $105,064 for
7,687,800 shares of common stock ($0.0137 per share).
During 2002, the Company received cash and subscriptions receivable of
$148,000 for 296,000 units consisting of one share of common stock and one
common stock warrant exercisable for a period of one year after an
effective Registration Statement is approved at an exercise price of $1.00
per share ($0.50 per share).
During 2003, the Company received cash and a subscription receivable of
$661,823 for 1,322,646 units consisting of one share of common stock with
one common stock warrant exercisable for a period of one year after an
effective Registration Statement is approved at an exercise price of $1.00
per share ($0.50 per share).
During the nine months ended September 30, 2004, the Company received cash
of $90,000 for 180,000 units consisting of one share of common stock with
one common stock warrant exercisable for a period of one year after an
effective Registration Statement is approved at an exercise price of $1.00
per share ($0.50 per share).
During the nine months ended September 30, 2004, the Company collected
$191,865 of subscriptions receivable.
(C) Common Stock and Warrants Issued for Services
--------------------------------------------------
During April 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 shares of common stock with a fair value of $50,000
based on recent cash offerings ($0.50 per share). The Company recorded
$16,667 and $33,333 of consulting expense for the years ended December 31,
2003 and 2002, respectively.
During May 2002, the Company entered into an agreement with a consultant to
provide services for a period of two months. The agreement called for
compensation of 12,710 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $6,355 based on recent
cash offerings. The Company recorded consulting expense of $6,355 for the
year ended December 31, 2002 ($0.50 per share).
During July 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $50,000 based on recent
6
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 AND 2004
---------------------------------
(UNAUDITED)
cash offerings ($0.50 per share). The Company recorded $27,083 and $22,917
of consulting expense for the years ended December 31, 2003 and 2002,
respectively.
During January 2004, the Company entered into a consulting agreement with a
consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of one
year and the consultant to receive: 200,000 shares of common stock, monthly
retainers of $4,000, warrants to purchase 100,000 shares of common stock at
an exercise price of $5.00 for a period of three years, and an option to
purchase 100,000 shares of common stock at an exercise price of $7.50 for a
period of three years. The common stock has a fair value of $100,000 based
on recent cash offerings and will be amortized over the life of the
agreement ($0.50 per share). As of September 30, 2004, the Company has
recognized consulting expense of $102,692 under the agreement.
(D) Common Stock Warrants
--------------------------
The Company issued 382,573 warrants during 2004, at an exercise price of
$1.00 per share to a consultant for services. The fair market value of the
warrants was estimated on the grant date using the Black-Scholes option
pricing model as required under SFAS 123 with the following weighted
average assumptions: expected dividend yield 0%, volatility 0%, risk-free
interest rate of 3.5%, and expected warrant life of one year. The value was
immaterial and therefore no expense was included in general and
administrative expense at the grant date.
In connection with the issuance of common stock units for cash and
services, the Company has an aggregate of 2,493,929 and 1,065,710 warrants
outstanding at September 30, 2004 and 2003, respectively. The Company has
reserved 2,493,929 shares of common stock for the future exercise of the
warrants.
(E) Amendment to Articles of Incorporation
-------------------------------------------
During 2004, the Company amended its Articles of Incorporation to provide
for an increase in its authorized share capital. The authorized capital
stock increased to 100,000,000 common shares at a par value of $0.01 per
share.
NOTE 3 COMMITMENTS AND CONTINGENCIES
- ------ -----------------------------
(A) Employment Agreement
-------------------------
During 2004, the Company entered into an employment agreement with a
consultant to assume the position of Chief Executive Officer and President
for a term of five years at an annual minimum salary of $250,000 with
7
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 AND 2004
---------------------------------
(UNAUDITED)
additional bonuses and fringe benefits. The agreement is to become
effective upon the approval by the Securities and Exchange Commission on
the SB-2 Registration Statement (See Notes 3(B) and (C)).
(B) Consulting Agreements
--------------------------
During December 2001, the Company entered into an agreement with a
consultant to serve as its interim President for a term of up to five
years. The agreement called for annual compensation of $250,000. The
agreement expires the earlier of December 2006 or on the effectiveness of
an SB-2 Registration Statement (See Note 3(A). The Company has accrued
$303,143 and $211,833 under the agreement to the consultant at December 31,
2003 and 2002, respectively.
During April 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 shares of common stock with a fair value of $50,000
based on recent cash offerings ($0.50 per share). The Company recorded
$16,667 and $33,333 of consulting expense for the years ended December 31,
2003 and 2002, respectively
During May 2002, the Company entered into an agreement with a consultant to
provide services for a period of two months. The agreement called for
compensation of 12,710 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $6,355 based on recent
cash offerings. The Company recorded consulting expense of $6,355 for the
year ended December 31, 2002 ($0.50 per share).
During June 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for cash
payments totaling $120,000. The Company recorded $55,000 and $65,000 of
consulting expense for the years ended December 31, 2003 and 2002,
respectively.
During July 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $50,000 based on recent
cash offerings. The Company recorded $27,083 and $22,917 of consulting
expense for the years ended December 31, 2003 and 2002, respectively ($0.50
per share).
During January 2004, the Company entered into a consulting agreement with a
consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of one
year and the consultant to receive: 200,000 shares of common stock, monthly
8
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2004 AND 2004
---------------------------------
(UNAUDITED)
retainers of $4,000, warrants to purchase 100,000 shares of common stock at
an exercise price of $5.00 for a period of three years, and an option to
purchase 100,000 shares of common stock at an exercise price of $7.50 for a
period of three years. The commons tock has a fair value of $100,000 based
on recent cash offerings and will be amortized over the life of the
agreement ($0.50 per share).
(C) License Agreement
----------------------
Upon effectiveness of the employment agreement with our Chief Executive
Officer and President, the Company will be entitled to use certain
technology that is owned by our Chief Executive Officer and President
royalty free until the end of the employment agreement. Upon termination of
the employment agreement with the Chief Executive Officer and President,
the Company has the right to license the technology for a one time fee
equal to the current replacement value of such technology determined by an
engineer's opinion acceptable to both parties (See Note 3(A)).
NOTE 4 RELATED PARTY TRANSACTIONS
- ------ --------------------------
See Notes 2 and 3.
NOTE 5 GOING CONCERN
- ------ -------------
As reflected in the accompanying financial statements, the Company is in
the development stage with no operations, a stockholders' deficiency of
$137,064 and used cash in operations from inception of $817,659. This
raises substantial doubt about its ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on
the Company's ability to raise additional capital and implement its
business plan. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional
funding and implement its strategic plans provide the opportunity for the
Company to continue as a going concern.
9
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PAGE 2 BALANCE SHEETS AS OF DECEMBER 31, 2003 AND 2002
PAGE 3 STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
2003 AND 2002 AND FOR THE PERIOD FROM NOVEMBER 6, 2001
(INCEPTION) TO DECEMBER 31, 2003
PAGES 4 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE
PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO DECEMBER 31,
2003
PAGE 5 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
2003 AND 2002 AND FOR THE PERIOD FROM NOVEMBER 6, 2001
(INCEPTION) TO DECEMBER 31, 2003
PAGES 6 - 11 NOTES TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Board of Directors of:
Alliance Recovery Corporation
(A Development Stage Company)
We have audited the accompanying balance sheets of Alliance Recovery Corporation
(a development stage company) as of December 31, 2003 and 2002, and the related
statements of operations, changes in stockholders' deficiency and cash flows for
the two years then ended and from November 6, 2001 (inception) to December 31,
2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board in the United States of America. Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Alliance Recovery Corporation (a
development stage company) as of December 31, 2003 and 2002 and the results of
its operations and its cash flows for the two years then ended and from November
6, 2001 (inception) to December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company is in the development stage with no
operations, a stockholders' deficiency of $109,666, and used cash in operations
from inception of $511,908. This raises substantial doubt about its ability to
continue as a going concern. Management's plans concerning this matter are also
described in Note 5. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
WEBB & COMPANY, P.A.
Boynton Beach, Florida
November 12, 2004
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------
ASSETS
------
2003 2002
--------------- ----------------
CURRENT ASSETS
Cash $ 192,737 $ -
--------------- ----------------
TOTAL ASSETS $ 192,737 $ -
- ------------ =============== ================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Cash overdraft $ - $ 9,316
Accounts payable and accrued expenses 302,403 226,833
--------------- ----------------
TOTAL CURRENT LIABILITIES 302,403 236,149
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' DEFICIENCY
Common stock, $0.01 par value, 100,000,000 shares authorized,
17,929,156 and 16,606,510 shares issued and outstanding, respectively 179,291 166,065
Additional paid in capital 925,551 277,454
Subscriptions receivable (209,742) (48,774)
Deferred stock compensation - (43,750)
Accumulated deficit during development stage (1,004,766) (587,144)
--------------- ----------------
Total Stockholders' Deficiency (109,666) (236,149)
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 192,737 $ -
- ---------------------------------------------- =============== ================
See accompanying notes to financial statements.
2
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
------------------------
For The Period From
For The Year For The Year November 6, 2001
Ended Ended (Inception) To
December 31, December 31, December 31,
2003 2002 2003
------------ ------------ ------------
OPERATING EXPENSES
Consulting fees $ 358,750 $ 381,105 $ 844,788
Professional fees 18,115 95,865 113,980
General and administrative 40,757 5,241 45,998
------------ ------------ ------------
TOTAL EXPENSES 417,622 482,211 1,004,766
------------ ------------ ------------
NET LOSS $ (417,622) $ (482,211) $ (1,004,766)
============ ============ ============
Net loss per share - basic and diluted $ (0.02) (0.03) $ (0.06)
============ ============ ============
Weighted average number of shares outstanding during the
period - basic and diluted 17,169,843 16,338,583 16,708,222
============ ============ ============
See accompanying notes to financial statements.
3
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO DECEMBER 31, 2003
Additional
Common Stock Paid-In Subscription
Shares Amount Capital Receivable
----------- ----------- ----------- -----------
Common stock issued to founders for services ($0.01 per
share) 8,410,000 $ 84,100 $ -- $ --
Common stock issued for cash ($0.0137 per share) 7,687,800 76,878 28,186 (105,064)
Net loss for the period from November 6, 2001
(inception) to December 31, 2001 -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2001 16,097,800 160,978 28,186 (105,064)
Common stock with warrants issued for services
($0.50 per share) 112,710 1,127 55,228 --
Common stock issued for services ($0.50 per share) 100,000 1,000 49,000 --
Common stock with warrants issued for cash
($0.50 per share) 296,000 2,960 145,040 --
Collection of subscriptions receivable -- -- -- 56,290
Net loss, 2002 -- -- -- --
----------- ----------- ----------- -----------
Balance, December 31, 2002 16,606,510 166,065 277,454 (48,774)
Amortization of deferred compensation -- -- -- --
Common stock with warrants issued for cash
($0.50 per share) 1,322,646 13,226 648,097 (160,968)
Net loss, 2003 -- -- -- --
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 2003 17,929,156 $ 179,291 $ 925,551 $ (209,742)
- -------------------------- =========== =========== =========== ===========
Accumulated
Deficit During
Deferred Stock Development
Compensation Stage Total
----------- ----------- -----------
Common stock issued to founders for services ($0.01 per
share) $ -- $ -- $ 84,100
Common stock issued for cash ($0.0137 per share) -- -- --
Net loss for the period from November 6, 2001
(inception) to December 31, 2001 -- (104,933) (104,933)
----------- ----------- -----------
Balance, December 31, 2001 -- (104,933) (20,833)
Common stock with warrants issued for services
($0.50 per share) (27,083) -- 29,272
Common stock issued for services ($0.50 per share) (16,667) -- 33,333
Common stock with warrants issued for cash
($0.50 per share) -- -- 148,000
Collection of subscriptions receivable -- -- 56,290
Net loss, 2002 -- (482,211) (482,211)
----------- ----------- -----------
Balance, December 31, 2002 (43,750) (587,144) (236,149)
Amortization of deferred compensation 43,750 -- 43,750
Common stock with warrants issued for cash
($0.50 per share) -- -- 500,355
Net loss, 2003 -- (417,622) (417,622)
----------- ----------- -----------
BALANCE, DECEMBER 31, 2003 $ -- $(1,004,766) $ (109,666)
- -------------------------- =========== =========== ===========
See accompanying notes to financial statements.
4
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
------------------------
For The Period
From November 6, 2001
For The Year For The Year (Inception)
Ended December 31, Ended December 31, To December 31,
2003 2002 2003
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (417,622) $ (482,211) $(1,004,766)
Adjustments to reconcile net loss to net cash used in operating
activities:
Stock issued for services 43,750 62,605 190,455
Changes in operating assets and liabilities:
Accounts payable and accrued expenses 75,570 206,000 302,403
----------- ----------- -----------
Net Cash Used In Operating Activities (298,302) (213,606) (511,908)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft (9,316) 9,316 --
Proceeds from issuance of common stock 500,355 204,290 704,645
----------- ----------- -----------
Net Cash Provided By Financing Activities 491,039 213,606 704,645
----------- ----------- -----------
NET INCREASE IN CASH 192,737 -- 192,737
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- -- --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 192,737 $ -- $ 192,737
=========== =========== ===========
See accompanying notes to financial statements.
5
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMRBER 31, 2003 AND 2002
---------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
- ------ -----------------------------------------------------------
(A) Organization
-----------------
Alliance Recovery Corporation (a development stage company) (the "Company")
was incorporated under the laws of the State of Delaware on November 6,
2001. The Company is developing resource recovery technologies and
strategies to convert industrial and other waste materials into fuel oil,
gases and other valuable commodities.
Activities during the development stage include developing the business
plan and raising capital.
(B) Use of Estimates
---------------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reported period.
Actual results could differ from those estimates.
(C) Cash and Cash Equivalents
------------------------------
For purposes of the cash flow statements, the Company considers all highly
liquid investments with original maturities of three months or less at the
time of purchase to be cash equivalents. The Company at times has cash in
excess of FDIC insurance limits and places its temporary cash investments
with high credit quality financial institutions. At December 31, 2003, the
company did not have any balances that exceeded FDIC insurance limits.
(D) Income Taxes
-----------------
The Company accounts for income taxes under the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement
109"). Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. As of December
31, 2003 and 2002, the Company has a net operating loss carryforward of
approximately $1,004,700 and $587,100, respectively, available to offset
future taxable income through 2023. The valuation allowance at December 31,
6
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMRBER 31, 2003 AND 2002
---------------------------------
2003 and 2002 was $351,645 and $205,485, respectively. The net change in
the valuation allowance for the year ended December 31, 2003 was an
increase of $146,160.
(E) Stock-Based Compensation
-----------------------------
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and Related Interpretations, in
accounting for stock warrants issued to employees. Under APB No. 25,
employee compensation cost is recognized when estimated fair value of the
underlying stock on date of grant exceeds exercise price of the stock
option. For stock options and warrants issued to non-employees, the Company
applies Statements of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation, which requires the recognition of
compensation cost based upon the fair value of stock warrants at the grant
date using the Black-Scholes option pricing model.
(F) Loss Per Share
-------------------
Basic and diluted net loss per common share is computed based upon the
weighted average common shares outstanding as defined by Financial
Accounting Standards No. 128, "Earnings Per Share." As of December 31, 2003
and 2002, common share equivalents were anti-dilutive and not used in the
calculation of diluted net loss per share.
(G) Business Segments
----------------------
The Company operates in one segment and therefore segment information is
not presented.
NOTE 2 STOCKHOLDERS' EQUITY
- ------ --------------------
(A) Common Stock Issued to Founders
------------------------------------
During 2001, the Company issued 8,410,000 shares of common stock to
founders for services with a fair value of $84,100 ($0.01 per share).
(B) Common Stock and Warrants Issued for Cash
----------------------------------------------
During 2001, the Company received subscriptions receivable of $105,064 for
7,687,800 shares of common stock ($0.0137 per share).
During 2002, the Company received cash and subscriptions receivable of
$148,000 for 296,000 units consisting of one share of common stock and one
7
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMRBER 31, 2003 AND 2002
---------------------------------
common stock warrant exercisable for a period of one year after an
effective Registration Statement is approved at an exercise price of $1.00
($0.50 per share).
During 2003, the Company received cash and a subscription receivable of
$661,323 for 1,322,646 units consisting of one share of common stock with
one common stock warrant exercisable for a period of one year after an
effective Registration Statement is approved at an exercise price of $1.00
($0.50 per share).
(C) Common Stock and Warrants Issued for Services
--------------------------------------------------
During April 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 shares of common stock with a fair value of $50,000
based on recent cash offerings ($0.50 per share). The Company recorded
$16,667 and $33,333 of consulting expense for the years ended December 31,
2003 and 2002, respectively.
During May 2002, the Company entered into an agreement with a consultant to
provide services for a period of two months. The agreement called for
compensation of 12,710 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $6,355 based on recent
cash offerings. The Company recorded consulting expense of $6,355 for the
year ended December 31, 2002 ($0.50 per share).
During July 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $50,000 based on recent
cash offerings ($0.50 per share). The Company recorded $27,083 and $22,917
of consulting expense for the years ended December 31, 2003 and 2002,
respectively.
(D) Common Stock Warrants
--------------------------
In connection with the issuance of common stock units for cash and
services, the Company has an aggregate of 1,731,356 and 408,710 warrants
outstanding at December 31, 2003 and 2002, respectively. The Company has
reserved 1,731,356 shares of common stock for the future exercise of the
warrants at December 31, 2003.
8
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMRBER 31, 2003 AND 2002
---------------------------------
NOTE 3 RELATED PARTY TRANSACTIONS
- ------ --------------------------
See Notes 2 and 4.
NOTE 4 COMMITMENTS AND CONTINGENCIES
- ------ -----------------------------
(A) Consulting Agreements
--------------------------
During December 2001, the Company entered into an agreement with a
consultant to serve as its interim President for a term of up to five
years. The agreement called for annual compensation of $250,000. The
agreement expires the earlier of December 2006 or on the effectiveness of
an SB-2 Registration Statement (See Note 6(E). The Company has accrued
$303,143 and $211,833 under the agreement to the consultant at December 31,
2003 and 2002, respectively.
During April 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 shares of common stock with a fair value of $50,000
based on recent cash offerings ($0.50 per share). The Company recorded
$16,667 and $33,333 of consulting expense for the years ended December 31,
2003 and 2002, respectively
During May 2002, the Company entered into an agreement with a consultant to
provide services for a period of two months. The agreement called for
compensation of 12,710 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $6,355 based on recent
cash offerings. The Company recorded consulting expense of $6,355 for the
year ended December 31, 2002 ($0.50 per share).
During June 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for cash
payments totaling $120,000. The Company recorded $55,000 and $65,000 of
consulting expense for the years ended December 31, 2003 and 2002,
respectively.
During July 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $50,000 based on recent
cash offerings. The Company recorded $27,083 and $22,917 of consulting
expense for the years ended December 31, 2003 and 2002, respectively ($0.50
per share).
9
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMRBER 31, 2003 AND 2002
---------------------------------
(C) License Agreement
----------------------
Upon effectiveness of the employment agreement with our Chief Executive
Officer and President, the Company will be entitled to use certain
technology that is owned by our Chief Executive Officer and President
royalty free until the end of the employment agreement. Upon termination of
the employment agreement with the Chief Executive Officer and President,
the Company has the right to license the technology for a one time fee
equal to the current replacement value of such technology determined by an
engineer's opinion acceptable to both parties (See Note 6(E).
NOTE 5 GOING CONCERN
- ------ -------------
As reflected in the accompanying financial statements, the Company is in
the development stage with no operations, a stockholders' deficiency of $
109,666, and used cash in operations from inception of $511,908. This
raises substantial doubt about its ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on
the Company's ability to raise additional capital and implement its
business plan. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional
funding and implement its strategic plans provide the opportunity for the
Company to continue as a going concern.
NOTE 6 SUBSEQUENT EVENTS
- ------ -----------------
(A) Issuance of Common Stock for Cash
--------------------------------------
During 2004, the Company issued 180,000 units consisting of one share of
common stock and one common stock warrant for cash of $90,000.
(B) Subscriptions Receivable
-----------------------------
During 2004, the Company received cash of $191,865 on subscriptions
receivable.
(C) Consulting Agreement
-------------------------
During January 2004, the Company entered into a consulting agreement with a
consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of one
year and the consultant to receive: 200,000 shares of common stock, monthly
retainers of $4,000, warrants to purchase 100,000 shares of common stock at
an exercise price of $5.00 for a period of three years, and an option to
purchase 100,000 shares of common stock at an exercise price of $7.50 for a
10
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMRBER 31, 2003 AND 2002
---------------------------------
period of three years. The common stock has a fair value of $100,000 based
on recent cash offerings and will be amortized over the life of the
agreement ($0.50 per share).
(D) Amendment to Articles of Incorporation
-------------------------------------------
During 2004, the Company amended its Articles of Incorporation to provide
for an increase in its authorized share capital. The authorized capital
stock increased to 100,000,000 common shares at a par value of $0.01 per
share.
(E) Employment Agreement
-------------------------
During 2004, the Company entered into an employment agreement with a
consultant to assume the position of Chief Executive Officer and President
for a term of five years at an annual minimum salary of $250,000 with
additional bonuses and fringe benefits. The agreement is to become
effective upon the approval by the Securities and Exchange Commission on
the SB-2 Registration Statement (See Notes 4(B) and (C)).
11
PART II-- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware expressly
authorizes a Delaware corporation to indemnify its officers, directors,
employees, and agents against claims or liabilities arising out of such persons'
conduct as officers, directors, employees, or agents for the corporation if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the Company. Neither the articles of
incorporation nor the Bylaws of the Company provide for indemnification of the
directors, officers, employees, or agents of the Company. The Company has not
adopted a policy about indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
The eighth article of our Certificate of Incorporation includes provisions to
eliminate, to the fullest extent permitted by Delaware General Corporation Law
as in effect from time to time, the personal liability of our directors for
monetary damages arising from a breach of their fiduciary duties as directors.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
SEC registration fee $ 377.99
Legal fees and expenses (1) $50,000
Accounting fees and expenses (1) $25,000
Miscellaneous and Printing fees(1) $ 5,000
Total (1) $80,377.99
(1) Estimated
Item 26. Recent Sales of Unregistered Securities.
On April 23, 2002, we issued 100,000 shares of our restricted common stock to
Ken Hurrell for financial advisory consulting services. The issuance was valued
at $.50 per share or $50,000. Our shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. No commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
31
not involve a public offering. Mr. Hurrell was a sophisticated investors and had
access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, Mr. Hurrell had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On May 1, 2002, we issued 12,710 shares of our restricted common stock to Ellis
Burrows for marketing strategies and consulting services. The issuance was
valued at $.50 per share or $6,355. Our shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. No commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Mr. Burrows was a sophisticated investors and had
access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, Mr. Burrows had the necessary investment intent as required by
Section 4(2) since they agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On July 15, 2002, we issued 100,000 shares of our restricted common stock to
Brawley Cathers Limited for resource recovery consulting services. The issuance
was valued at $.50 per share or $50,000. Our shares were issued in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act
of 1933. No commissions were paid for the issuance of such shares. All of the
above issuances of shares of our common stock qualified for exemption under
Section 4(2) of the Securities Act of 1933 since the issuance of such shares by
us did not involve a public offering. Brawley Cathers Limited was a
sophisticated investor and had access to information normally provided in a
prospectus regarding us. The offering was not a "public offering" as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, Brawley Cathers Limited had the necessary
investment intent as required by Section 4(2) since they agreed to and received
a share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
From April 2002 through October 2002, we issued 296,000 shares of our restricted
common stock to the following parties for cash consideration of $.50 per share:
Daniel Carraro - 20,000 shares; Cridon Investments - 40,000 shares; Eagle
Visions - 100,000 shares; David Fisher - 26,000 shares; Jurek Gebczynski -
10,000 shares; Donna Grills - 40,000; Rebecca McKinnon - 20,000 shares; and
Jewan Naraine - 20,000 shares. The issuances were valued at $.50 per share or
$148,000 in the aggregate. Our shares were issued in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The above listed parties were sophisticated
investors and had access to information normally provided in a prospectus
regarding us. The offering was not a "public offering" as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, the above listed parties had the necessary investment
intent as required by Section 4(2) since they agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
32
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
From January 2003 through December 2003, we issued 1,322,646 shares of our
restricted common stock to the following parties for cash consideration of $.50
per share:
Date of Shares Consideration
Investor Purchase Purchased Paid
- -------- -------- --------- ----
Lorna Benson 1/1/2003 20,000 $10,000
Sheldon Earnest Benson 1/1/2003 20,000 10,000
Donald Triebner 1/1/2003 20,000 10,000
Lewis Martin 1/1/2003 40,000 20,000
Walter Martin 1/1/2003 40,000 20,000
Michael Caputo 2/1/2003 5,000 2,500
John Hondzel 2/1/2003 3,000 1,500
John Hondzel 2/1/2003 4,000 2,000
Diane Uptigrove 2/1/2003 12,500 6,250
Paul Uptigrove 2/1/2003 12,500 6,250
Peter Keegan 2/1/2003 4,000 2,000
Bruce W. Lyle 2/1/2003 1,500 750
Greg Steven & Elinor Evans 2/1/2003 4,000 2,000
Woyciech Dobkowski 2/1/2003 2,000 1,000
Paula M. Heard 2/1/2003 2,000 1,000
Barbara Joan Coghlan 2/1/2003 5,000 2,500
James Coghlan 2/1/2003 5,000 2,500
Frederik John Schuringa 2/1/2003 2,000 1,000
Grant Douglas McKinnell 2/1/2003 4,000 2,000
Neil Douglas McKinnell 2/1/2003 4,000 2,000
Ruby Chicks Investment, Inc. 2/1/2003 5,000 2,500
Alfred Pettersen 2/1/2003 2,000 1,000
Harold E. Thomson 2/1/2003 4,000 2,000
Willie E. Wright 2/1/2003 2,000 1,000
Arlene Woolcox 2/1/2003 2,000 1,000
Nicolas Woolcox 2/1/2003 2,000 1,000
Christopher Woolcox 2/1/2003 1,000 500
Shaun Woolcox 2/1/2003 2,000 1,000
Robert Orlo Woolcox 2/1/2003 2,000 1,000
Gordon O'Neil & Crystal Smith 2/1/2003 5,000 2,500
Steven Maste 2/1/2003 1,580 790
Gary Bernhard & Margaret Ostby 2/1/2003 6,000 3,000
Tina Raiche - Burchell 2/1/2003 4,000 2,000
Randy & Diane Elms 2/1/2003 1,000 500
874297 Ontario Ltd. 2/1/2003 5,000 2,500
Frank Toonders 2/1/2003 1,000 500
David Goodhand 2/1/2003 2,000 1,000
Czeslaw Landowski 2/1/2003 4,000 2,000
Diana Letourineau 2/1/2003 5,000 2,500
William J. Loyens 2/1/2003 2,500 1,250
John Peter Loyens 2/1/2003 2,000 1,000
Lynn Schmidt 2/1/2003 5,000 2,500
Jennifer Lamarche Schmalz 2/1/2003 1,500 750
Lori Bowman 2/1/2003 2,000 1,000
Joyce Lamarche 2/1/2003 3,000 1,500
Robert G. Maloley 2/1/2003 6,000 3,000
Frank Melo 2/1/2003 5,000 2,500
Richard John Tusch 2/1/2003 2,000 1,000
Eleanor Lukings 2/1/2003 2,000 1,000
823284 Ontario, Inc. 2/1/2003 7,920 3,960
Ron Swaddling 2/1/2003 5,000 2,500
Kareen L. Caputo 2/1/2003 5,000 2,500
Jane Gowing & Karen Faguy 2/1/2003 5,000 2,500
Elliot Strashin 2/1/2003 3,000 1,500
Mary Dider 2/1/2003 3,000 1,500
Mark Vernet 2/28/2003 2,000 1,000
Jewan Naraine 6/1/2003 20,000 10,000
Michael Caputo 6/1/2003 5,000 2,500
Walter Martin 6/1/2003 140,000 70,000
Brian Carr 6/1/2003 45,000 22,500
Deborah J. Harris 6/1/2003 5,000 2,500
Peter G. Millar 6/1/2003 2,000 1,000
Christopher P. Arnot 6/1/2003 3,000 1,500
Henry Guetter 6/1/2003 8,000 4,000
Hank Van Burgsteden 6/1/2003 4,000 2,000
Boguslaw Dudziak 6/1/2003 4,000 2,000
Wim Van Burgsteden 6/1/2003 10,000 5,000
Donald Degraw 6/1/2003 4,000 2,000
Joseph A. Stachura 6/1/2003 4,000 2,000
Douglas Lloyd Smith 6/1/2003 10,000 5,000
Randy Stachura 6/1/2003 4,000 2,000
Steven Azmier & Susan Vaisler 8/1/2003 40,000 20,000
33
Robert John Shea 8/1/2003 10,000 5,000
Kevin Francis McFall 8/1/2003 10,000 5,000
Douglas B. Lawrence 10/1/2003 3,000 1,500
Gary Ostby 11/1/2003 3,000 1,500
Margaret Otsby 11/1/2003 3,000 1,500
Walter Martin 11/1/2003 60,000 30,000
Robert John Shea 11/1/2003 30,000 15,000
Robert John Shea in trust for 11/1/2003 10,000 5,000
Matthew & Victoria
Rashelle Babij 11/1/2003 7,587 3,793.50
Charles David MacDonald 11/1/2003 8,000 4,000
Glen D. Killback 11/1/2003 6,000 3,000
John Burchell 11/1/2003 8,000 4,000
James Barry LaChance 11/1/2003 4,559 2,279.64
Richard John Tusch 11/1/2003 5,000 2,500
John D. Arlinghaus 11/1/2003 2,000 1,000
Envo Tech, Inc. 11/1/2003 20,000 10,000
Frank Toonders 11/1/2003 5,000 2,500
Randall Sinclair 11/1/2003 6,000 3,000
Pamela J. Boyd 11/1/2003 10,000 5,000
Mark E. Wernet 11/1/2003 3,000 1,500
Gary Ostby 12/1/2003 10,000 5,000
Margaret Otsby 12/1/2003 10,000 5,000
Geary Naraine 12/1/2003 80,000 40,000
Jewan Naraine 12/1/2003 80,000 40,000
Sheldon Earnest Benson 12/1/2003 20,000 10,000
Henry Guetter 12/1/2003 16,000 8,000
Steven Azmier & Susan Vaisler 12/1/2003 10,000 5,000
Andre Paul Lechner 12/1/2003 12,000 6,000
Pamela Gowing 12/1/2003 1,000 500
Narais N. Mangal 12/1/2003 10,000 5,000
Elle Lee, Inc. 12/1/2003 6,000 3,000
Shannon M. Pringle 12/1/2003 10,000 5,000
Joy A. Smith 12/1/2003 6,000 3,000
Jodie Tonita 12/1/2003 6,000 3,000
Global Partners, Inc. 12/1/2003 14,000 7,000
Grant Allan Grobman 12/1/2003 15,000 7,500
Salim Sitabkhan 12/1/2003 10,000 5,000
Julie A. & Gary G. Sikorski 12/1/2003 4,000 2,000
William Scott Machesney 12/1/2003 10,000 5,000
Michael Caputo 12/1/2003 11,000 5,500
1571469 Onatario Inc. c/o Jamie Wilson 12/1/2003 20,000 10,000
Ronald A. Hillman 12/1/2003 31,000 15,500
Robert W. Hillman 12/1/2003 31,000 15,500
Karen Lee Degraw 12/1/2003 6,000 3,000
John Peter Loyens 12/1/2003 7,000 3,500
Barbara Joan Coghlan 12/1/2003 6,000 3,000
Nadene Anne McKinnell 12/1/2003 6,000 3,000
Gordon O'Neil & Crystal Smith 12/1/2003 7,500 3,750
Tony & Louise Van Wyngaarden 12/1/2003 10,000 5,000
John D.Rumsam 12/1/2003 6,000 3,000
The issuances were valued at $.50 per share or $661,323 in the aggregate. Our
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. No commissions were paid for the
issuance of such shares. All of the above issuances of shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance of such shares by us did not involve a public offering. The
above listed parties were sophisticated investors and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, the above listed parties
had the necessary investment intent as required by Section 4(2) since they
agreed to and received a share certificate bearing a legend stating that such
shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These
restrictions ensure that these shares would not be immediately redistributed
into the market and therefore not be part of a "public offering." Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act of 1933 for the above
transaction.
On January 14, 2004, we issued 200,000 shares of our restricted common stock to
Mirador Consulting, Inc. for consulting services. The issuance was valued at
$.50 per share or $100,000. Our shares were issued in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Mirador Consulting, Inc. was a sophisticated
investors and had access to information normally provided in a prospectus
regarding us. The offering was not a "public offering" as defined in Section
34
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, Mirador Consulting, Inc. had the necessary investment
intent as required by Section 4(2) since they agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
From January 2004 through June 2004, we issued 180,000 shares of our restricted
common stock to the following parties for cash consideration of $.50 per share:
Lance Appleford - 10,000 shares; Rod Robinson - 140,000 shares; Jurek Gebczynski
- - 10,000 shares; and Jewan Naraine - 20,000 shares. The issuances were valued at
$.50 per share or $90,000 in the aggregate. Our shares were issued in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act of 1933. No commissions were paid for the issuance of such shares. All of
the above issuances of shares of our common stock qualified for exemption under
Section 4(2) of the Securities Act of 1933 since the issuance of such shares by
us did not involve a public offering. The above listed parties were
sophisticated investors and had access to information normally provided in a
prospectus regarding us. The offering was not a "public offering" as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of shares offered. We
did not undertake an offering in which we sold a high number of shares to a high
number of investors. In addition, the above listed parties had the necessary
investment intent as required by Section 4(2) since they agreed to and received
a share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for the above transaction.
All of the above issuances of shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance of such
shares by us did not involve a public offering. Each of these shareholders was a
sophisticated investor and had access to information regarding us. The offering
was not a "public offering" as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in which
we sold a high number of shares to a high number of investors. In addition,
these shareholders had the necessary investment intent as required by Section
4(2) since they agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transactions.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
EXHIBIT DESCRIPTION
3.1 Certificate of Incorporation and Amendments
3.2 By-Laws
5.1 Opinion and Consent of Anslow & Jaclin, LLP
10.1 Peter Vaisler Employment Agreement
10.2 Peter Vaisler Consulting Agreement
10.3 Mirador Consulting, Inc., Consulting Agreement
23.1 Consent of Webb and Company P.A., Certified Public Accountants.
24.1 Power of Attorney (included on signature page of Registration
Statement)
35
Item 28. Undertakings.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii)Include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Monroe, State of Michigan
on the 27th day of December, 2004.
ALLIANCE RECOVERY CORPORATION
By: S/S PETER VAISLER
- ----------------------------------
PETER VAISLER
Chairman of the Board of
Directors, President and Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Alliance Recovery Corporation hereby
constitute and appoint Peter Vaisler, with full power to act without the other
and with full power of substitution and resubstitution, our true and lawful
attorneys-in-fact with full power to execute in our name and behalf in the
capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such attorneys-
in-fact, or any them, or their substitutes, shall lawfully do or cause to be
done by virtue thereof. Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ PETER VAISLER Chairman of the Board of Directors December 27, 2004
PETER VAISLER Chief Executive Officer, President
Principal Financial Officer
/S/ DAVID WILLIAMS Director December 27, 2004
DAVID WILLIAMS
/S/ WALTER MARTIN Director December 27, 2004
WALTER MARTIN
37