AMENDMENT NO. 4 TO 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 $245.35
Common Stock, par value, $0.01 per share (2) 2,436,502 $0.50 $1,218,251 $143.39
Common Stock, par value, $0.01 per share (3) 100,000 $5.00 $ 500,000 $ 58.85
Common Stock, par value, $0.01 per share (4) 100,000 $7.50 $ 750,000 $ 88.28
- --------------------------------------------------------------------------------------------------------------
Total 6,805,658 $4,552,829 $535.87
(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 all of the Selling Security Holders except Mirador
Consulting, Inc. 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.
(3) Represents shares of common stock issuable in connection with the conversion
of 100,000 warrants issued to Mirador Consulting, Inc. The price of $5.00 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.
(4) Represents shares of common stock issuable in connection with the conversion
of 100,000 warrants issued to Mirador Consulting, Inc. The price of $7.50 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 JUNE , 2005
2
ALLIANCE RECOVERY CORPORATION
6,805,658 SHARES OF COMMON STOCK
We are registering 6,805,658 shares of our common stock as follows: (i) our
selling security holders are offering to sell 4,169,156 shares of our common
stock and; (ii) 2,636,502 shares of our common stock issuable in connection with
the conversion of our warrants. One of our selling security holders, Brawley
Cathers Limited is a broker-dealer and an "underwriter" with the meaning of the
Securities Act of 1933 with respect to the shares that it is offering for
resale.
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 COMPANY DOES NOT BELIEVE THAT IT IS A BLANK CHECK COMPANY AS THAT TERM IS
DEFINED IN RULE 419 OF REGULATION C UNDER THE RULES OF THE SECURITIES ACT OF
1933.
There is presently no public market for our shares of common stock and they are
not traded on any stock exchange. After this registration statement is declared
effective, we intend to have a registered broker-dealer submit an application
for a quotation of our shares of common stock on the OTC Bulletin Board.
The selling stockholders will sell their common stock at the price of $.50 per
share until our shares of common stock are quoted on the OTC Bulletin Board (or
any other recognized exchange). Thereafter, the selling stockholders may sell
their shares at prevailing market prices or privately negotiated prices. Based
on this, the purchasers in this offering may be receiving an illiquid security
since there is currently no market for these shares to develop.
The date of this prospectus is June , 2005
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
2,636,502 outstanding warrants.
3
TABLE OF CONTENTS
ABOUT US............................................................5
RISK FACTORS........................................................6
USE OF PROCEEDS....................................................10
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........11
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION..........13
BUSINESS...........................................................18
LEGAL PROCEEDINGS..................................................30
MANAGEMENT.........................................................30
PRINCIPAL STOCKHOLDERS.............................................33
SELLING STOCKHOLDERS...............................................34
PLAN OF DISTRIBUTION...............................................40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................41
DESCRIPTION OF SECURITIES..........................................41
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......... ......................42
TRANSFER AGENT.....................................................42
EXPERTS............................................................42
LEGAL MATTERS......................................................42
FINANCIALS.........................................................F-1
RECENT SALES OF UNREGISTERED SECURITIES............................
4
SUMMARY INFORMATION
HOW WE ARE ORGANIZED AND OUR OPERATIONS
Alliance Recovery Corporation 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 currently have no business operations. We intend, through future wholly-owned
subsidiaries, to build processing plants in various large urban centers of the
United States. We intend to operate strategically positioned manufacturing
process units ("ARC Units") in selected states of the United States. ARC Units
are based upon several existing manufacturing processes integrated into a single
production facility. Prior to the waste to energy process, an initial volume
reduction system is designed to compact approximately 3,000 pounds of rubber
waste into 4' x 4' x 8' ecoblocks for convenient and safe storage. The waste to
energy conversion process reduces waste rubber using a thermal process to
produce fuel oil to power large reciprocating engines driving alternators
generating electrical energy for sale to adjacent users or into local power
grids. Scrap tires will be the main rubber waste, which when reduced to oil,
provides the fuel for the production of energy and gases to power the ARC unit.
We will receive tipping fees in exchange for providing a point of final
disposition for rubber waste. In addition to process fuel gases generated in the
conversion reaction, the ARC Unit also has the ability to recover other residual
by-products from the rubber to oil thermal conversion process. Carbon black and
steel are recovered in marketable qualities and quantities. Steam and/or hot
water, produced during the thermal conversion process are also marketable
recovered by-products. The ARC Unit was developed by our founder, Peter Vaisler,
a team of third-party consulting engineers and scientists, as well as
individuals with specific business and process and equipment operations
knowledge acquired from hands on operating experience with the various system
components. The ARC Unit is an integration of existing process technology
currently in use as stand alone manufacturing processes.
We have identified a number of potential sites for the construction of our first
installation.
Our auditors have issued us a going concern opinion.
Two of our officers and directors, David Williams and Peter Vaisler, own the
majority of our shares allowing them to control all of our actions.
We believe that we are not a blank check company as that term is defined in Rule
419 of Regulation C under the Rules of the Securities Act of 1933. We do not
have any intention of merging with another company or allowing ourselves to be
acquired by another company, or to act as a blank check company as defined in
Regulation C.
WHERE YOU CAN FIND US
We are located at #390-1285 N. Telegraph Road, Monroe, Michigan 48162-3368. Our
telephone number is (519) 671-0417 and our fax number is (519) 473-6507.
SECURITIES OFFERED BY US
We are not offering any securities. All shares being registered are for our
selling security holders. There is presently no public market for our shares of
common stock and they are not traded on any stock exchange. After this
registration statement is declared effective, we intend to have a registered
broker-dealer submit an application for a quotation of our shares of common
stock on the OTC Bulletin Board. Prior to such time, our shares will be illiquid
because there is no currently no market fro the shares to develop. 400,000
shares of our common stock being registered in this offering are owned by an
entity controlled by David Williams, one of our directors.
5
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.
OUR INDEPENDENT AUDITOR HAS ISSUED A GOING CONCERN OPINION WHICH RAISES DOUBTS
ABOUT OUR ABILITY TO CONTINUE AS A VIABLE ENTITY
Our independent auditor has expressed substantial doubt about our ability to
continue as a going concern. The notes to our financial statements include an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern. Among the reasons cited in the notes as raising substantial
doubt as to our ability to continue as a going concern are the following: we are
a development stage company with no operations, a stockholders' deficiency of
$253,297, a working capital deficiency of $262,508 and cash used in operations
from inception of $861,240. Our ability to continue as a going concern is
dependent on our ability to further implement our business plan, raise
additional capital and generate revenues. These conditions raise substantial
doubt about our ability to continue as a going concern.
We have a history of operating losses, limited funds and may continue to incur
operating losses. If these continue, we may ultimately be required to seek
protection from creditors under applicable bankruptcy laws.
WE CAN LOSE THE RIGHT TO USE THE TECHNOLOGY THAT IS A VITAL PART OF OUR BUSINESS
PLAN SINCE WE ONLY HAVE THE RIGHT TO USE THIS TECHNOLOGY PURSUANT TO OUR
EMPLOYMENT AGREEMENT WITH PETER VAISLER, OUR CEO, PRESIDENT AND DIRECTOR
There is certain technology that we need to use to be able to carry out our
business plan. This technology is owned by Peter Vaisler, our CEO, President and
director. He licenses the technology to us pursuant to the employment agreement
we have with him. If Mr. Vaisler's employment agreement is terminated, we may
lose the right to use the technology. This will prevent us from carrying out our
business plan. However, if the employment agreement is terminated, we have the
right to license the technology for a onetime fee equal to the current
replacement value of the technology determined by an engineer's opinion
acceptable to us and Mr. Vaisler.
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.
After this registration statement is declared effective, we intend to apply have
a registered broker-dealer file an application for a quotation of our shares of
common stock on the OTC Bulletin Board. There is no assurance that such
application will be approved. Therefore, there is no assurance that the shares
can be resold.
SINCE OUR OFFERING PRICE WAS ARBITRARILY DETERMINED, YOU MAY PURCHASE SHARES OF
OUR COMMON STOCK AT A PRICE THAT IS MUCH HIGHER THAN YOUR PURCHASE PRICE
Since the offering price was arbitrarily determined and has no relation to our
assets, earnings, book value or other criteria of value, there is no assurance
of the stock price of our shares of common stock, if, and when, it gets approved
for a quotation on the OTC Bulletin Board. Therefore, you may purchase shares
from selling security holders at a price that will be much higher than you
subsequently sell such shares of our common stock.
6
WE HAVE A LIMITED OPERATING HISTORY, HAVE NO OPERATIONS OR REVENUES TO DATE AND
BASED ON THIS THERE IS NO ASSURANCE THAT WE WILL BECOME A SUCCESSFUL BUSINESS.
We are a development stage company with no operations or revenues to date. We
intend to utilize both design/build and turn-key equipment contracts, operation
and maintenance contactors to operate various components of our first
installation and will assemble a management and operations team familiar with
the plant's process system. However, our likelihood of success must be
considered in light of all of the risks, expenses and delays inherent in
establishing a new business, including, but not limited to, unforeseen expenses,
complications and delays, established competitors and other factors. The
services of seasoned contracted operators and experienced key management
professionals, is no assurance that we will ever achieve profitable operations.
Since we presently do not have any business operations, we will not need
financing until we raise $20M and commence operations of our facility. In the
interim, our present shareholders and management have indicated a willingness to
provide short term financing.
WE ARE DEPENDENT ON KEY EMPLOYEES, ENGINEERS, CONSULTANTS AND CONTRACTORS AND
THE LOSE OF ANY OF THEM OR THEIR INABILITY TO COMPLETE THE PROJECT CAN LEAD TO
OUR DEMISE
Our success is materially dependent upon the expertise and experience of our
executives and certain consultants. A corporate team of highly qualified project
managers, engineers, and experienced executives, familiar with the successful
commercialization of leading edge technologies, has been responsible for our
efforts to date. Key management positions have been identified and we continue
to have discussions with qualified candidates until such time as the entire
project capitalization has been completed. These individuals may leave their
current employment upon completion of our capitalization and may join us as
executives. However, there is no guarantee that the project capitalization will
be completed and similarly, if completed there is no guarantee that we will be
able to attract the appropriate management team in a timely manner.
The process system technology was designed and is being enhanced by our founder
and certain engineering consultants. This group includes Peter Vaisler, our
President and CEO; and Resource International Ltd., a Virginia-based engineering
firm that will be responsible for our overall project management, equipment
installation, site engineering, permit approvals, construction surveillance,
system design, sourcing and fabrication, mechanical and structural installation,
and operator training. The overall project will be managed by Resource
International Ltd. However, qualified and specialized sub-contractors will be
utilized by Resource International Ltd. for specific tasks. As an example,
Resource International Ltd. will utilize the services of a sub-contractor for
heat recovery design, and boiler systems fabrication selection and steam/hot
water energy systems. The ultimate engineering group has many years of
experience in process engineering and controls, energy production and waste to
energy, manufacturing, and thermal manufacturing and disposal technology, but
could be unsuccessful in completing the first installation. There is no
assurance that their combined expertise which includes waste disposal, waste
handling, incineration, thermal reduction, electrical generation and carbon
black manufacturing will allow the project to be completed.
Our success is also materially dependent upon the experience and expertise of
Peter Vaisler, our President, CEO and a Director, and his ability to attract
executives upon completion of our overall capital financing. There is no
guarantee that this financing will occur. We have entered into a five-year
employment agreement (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.
7
IF WE ARE UNABLE TO PROCURE NEEDED PERMITS, THE PROJECT WILL NOT BE COMPLETED
AND WE WILL, MOST LIKELY, CEASE OPERATIONS.
Resource International Ltd. has worked with our founder, Peter Vaisler in order
to develop our technology. Resource International Ltd. will work with us to
secure any permits required in connection with the construction and operation of
our facilities. We believe that any emissions produced by our facilities will be
within EPA standards and therefore do not anticipate difficulty in obtaining
state or local permits and are not aware of any federal environmental permitting
requirements. However, there is no assurance that we will be able to meet all
permitting requirements in our target markets in the United States or in foreign
jurisdictions. In addition, existing EPA guidelines and other environmental
regulations could be revised, making it difficult or impossible for us to meet
the any such new requirements. If we are unable to acquire all necessary
permits, we would be unable to start our business and would be forced to seek
permits elsewhere which could critically delay or cancel the overall project.
This could cause us to cease our operations.
UNIQUE RISKS OF OUR BUSINESS
IF WE DO NOT PROCESS WASTE, OUR REVENUES WILL NOT BE SIGNIFICANT AND NEGATIVELY
IMPACT OUR OPERATIONS AND FUTURE EXPANSION
There may not be a sufficient volume of waste rubber generated in vicinity of
our first showcase facility, at a site to be determined to make our operations
cost efficient. Furthermore, we may not be able to encourage tire jockeys,
truckers and waste operators servicing these areas to utilize our first facility
an facility as an alternative to trucking the waste to disposal sites positioned
away from urban cities or to out of state disposal sites. Our targeted
marketing/education program may not be successful in getting those operators in
the disposal chain to be "environmentally responsible" by utilizing an urban or
regionally based point of final disposition instead of trucking the waste to
another jurisdiction, possibly even out of state. Also, tire and rubber goods
manufacturers may develop products that will not wear out or have an extended
life thereby reducing the volume of rubber waste generated annually requiring
disposal. If any of the above occurs, we will not have sufficient revenues. This
will have a negative impact on our business and can deter our future expansion.
POSSIBLE CHANGES IN ENVIRONMENTAL REGULATIONS CAN MAKE IT DIFFICULT AND COSTLY
TO COMPLY WITH AND CAUSE US TO CHANGE OUR BUSINESS PLAN AND RESULT IN A
REDUCTION OF REVENUES
Unforeseen changes in environmental regulations could make it difficult, or even
impossible for management and their engineering team to amend existing
environmental permits or to reapply for new permits. Changes in Federal or State
laws could make it difficult or impossible to comply with emission, storage,
operation and transportation regulations. This can result in a change to our
business plan if we can not obtain certain amendments to permits or such changes
cause us to expend more resources than expected. In addition, this will most
likely lead to a reduction in revenues.
In addition, changes in government policies affecting storage, handling and
processing of scrap tires, rubber waste and air quality standards could have a
material adverse effect on us.
8
A CHANGE IN MARKET OR ECONOMIC CONDITIONS CAN RESULT IN LOSING THE MARKET FOR
ELECTRICAL ENERGY THAT WE INTEND TO PRODUCE RESULTING IN A CESSATION OF OUR
BUSINESS
There may not be a market for the electrical energy generated as a result of a
change in market or economic conditions, and implementation of a new form of
energy production technology and/or materials. Also, there may not be a market
for the by-products we intend to produce, including carbon black, steel and
steam and/or hot water. Poor economic conditions and/or high fuel costs could
cause disruptions in transportation and/or labor disputes in a declining or
inflationary economy and could make it impossible to obtain waste rubber for
conversion to fuel oil. However, an inflationary economy could actually benefit
us as increased energy prices would increase revenues from both electricity and
carbon black sales. The facility may never be able to acquire a sufficient
inventory as a result of any or a combination of the aforementioned and result
in the cessation of our business.
SEVERAL FACTORS COULD RESULT IN OUR FACILITY NOT OPERATING PROPERLY AND LEAD TO
OUR DEMISE
Although management believes that similar process furnaces are operating at
numerous locations around the world, the oil conversion furnace and all
ancillary equipment normally associated with thermal reactions may not function
properly and neither the fabricator/suppliers nor management or their
engineering team may be able to correct the deficiency. Employees could sabotage
the processing equipment causing a business interruption causing the facility to
not make sufficient product or energy to meet its financial projection. We
expect to enter into a contractual arrangement with a third-party operator for
the production and sale of the electrical energy to be produced. The contract
may never be completed. All of the above factors could result in our demise.
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP A MARKET FOR OUR PRODUCTS WHICH WILL
CAUSE US TO FAIL TO MEET PROJECTED REVENUES
We intend to sell electricity to local utilities. The contracted electrical
utility company responsible for electrical energy generation and sales may not
be able to develop sufficient market share for electrical energy. Similarly,
management and our consultants may not successfully develop a market for carbon
black, scrap steel or other residual products we could generate, and as a result
may not achieve projected revenues. The failure to reach certain financial
performance levels could negatively impact our financial viability and could
make it difficult for us to expand operations into additional U.S. urban cities.
IF WE DO NOT ATTRACT CERTAIN MARKETING, OPERATIONS AND ENGINEERING STAFF, WE
WILL HAVE DIFFICULTY IN MANAGING OUR FIRST FACILITY. THIS CAN RESULT IN A DELAY
OF STARTING UP THE FACILITY AND/OR A REDUCTION OF REVENUES BASED ON LOWER OUTPUT
RATES
Although key operations positions are contracted out, we may not be able to
attract marketing, operations, and engineering staff with sufficient acumen and
abilities to successfully manage our first facility. Training deficiencies could
cause the facility to operate at lower output rates, which would negatively
impact our financial performance. Similarly, the start-up period of the facility
could be extended as a result of fabricators and/or contractors correcting
technical deficiencies. Although delivery and performance guarantees will be
provided by fabricators and/or contractors, a business failure by any of these
entities could delay the start-up of the installation, while financial and other
guarantees, notices and cure periods are implemented with respect to completing
the installation and start-up of the facility.
THE FAILURE OF REGULATORY APPROVAL BY GOVERNMENT AGENCIES FOR OUR FUTURE SITES
WILL RESULT IN A DELAY ON REALIZING A RETURN ON OUR INVESTMENT
The selection of future sites and the development and operation of our
installations are subject to regulatory approval by governmental agencies. While
the fact that our engineering consultants at Resource International have
pre-qualified 12 sites from an environmental approval perspective, each site may
be subject to local and state regulations concerning storage, processing and
handling of rubber waste including scrap tires and air quality standards.
Additionally, there can be no assurance that we will be able to locate and lease
or purchase a sufficient number of suitable sites within the expansion area or
that difficulties will not be encountered by us or third parties in their
efforts to secure necessary approvals which could delay us from realizing a
return on our investment.
9
WE WILL NEED TO RAISE FUNDS TO DEVELOP ADDITIONAL INSTALLATION OF FACILITIES AND
THERE IS NO ASSURANCE WE WILL RAISE SUCH FUNDS
We will also be dependent on our ability to raise funds to develop additional
installation through private placements or other sources. We have no plans, at
this time, to secure solid waste disposal bond funds. There can be no assurance
that in the case of solid waste disposal bond funds that provide tax incentives
to promote the availability of solid waste disposal bonds will continue. The
ability to raise additional funds will be determined by the operational success
of the first installation to be built upon a yet to be determined site. Thus,
there can be no assurance that we will be successful in obtaining financing.
OTHER ENERGY COMPANIES AND DISPOSAL COMPANIES WITH MORE EXPERIENCE MAY COMPETE
WITH US CAUSING A DECREASE IN THE MARKET SHARE
While we believe we have no direct competitors, a number of other firms are
engaged in the production of energy, carbon black and the like. Also, other
firms are engaged in the business of disposal and processing of scrap tires. Our
likely competitors are: JM Beer Corp., Conrad Industries, and Unisphere
Corporation. If such companies compete with us, this can result in a reduction
of our market share.
OUR PRINCIPAL OFFICER AND A DIRECTOR HAVE CONTROL OF US
Peter Vaisler, our President, CEO and Director, and David Williams and Walter
Martin, our directors, in the aggregate own approximately 59% of our issued and
outstanding common stock. Therefore, they control us and can control the
election of our directors and officers.
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker- dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit the market
price and liquidity of our securities. Broker- dealers who sell penny stocks to
certain types of investors are required to comply with the Commission's
regulations concerning the transfer of penny stocks. These regulations require
broker- dealers to:
o Make a suitability determination prior to selling a penny stock to the
purchaser;
o Receive the purchaser's written consent to the transaction; and
o 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.
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. However, we will receive $2,436,502 from the
exercise of the 2,436,502 warrants which are exercisable at $1.00 per share. In
addition, we will also receive also receive $1,250,000 from the exercise of the
200,000 Mirador warrants which are exercisable at the following prices: 100,000
at $5.00 per share and 100,000 at $7.50 per shares. Therefore, we will receive
aggregate proceeds of $3,686,502 from the exercise of the outstanding warrants.
Any proceeds from the exercise of the warrants will be allocated for general
working capital. We have agreed to pay all the offering expenses related to this
offering.
10
DETERMINATION OF OFFERING PRICE
The price of $0.50 is based on the share price paid by the selling security
holders for the purchase of the units, which consisted of a share of our common
stock and a warrant to purchase a share of our common stock at $1.00 per share.
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 June 9, 2005, we had 135 shareholders of record.
Such shareholders of record held 18,792,156 shares of our common stock, in
addition to 2,876,502 shares of our common stock issuable upon the exercise of
all of our outstanding share purchase warrants.
The selling stockholders will sell their common stock at the price of $.50 per
share until our shares of common stock are quoted on the OTC Bulletin Board (or
any other recognized exchange). Thereafter, the selling stockholders may sell
their shares at prevailing market prices or privately negotiated prices.
As of June 9,2005, we had 2,876,502 warrants outstanding.
As of June 9, 2005, we had 18,129,156 shares that were eligible to be sold under
Rule 144 of the 1933 Securities Act. Of such shares, 10,790,000 are held by the
following officers and/or directors: Peter Vaisler - 7,750,000; David Williams -
2,800,000; and Walter Martin - 240,000.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of June 9, 2005, with
respect to compensation plans under which our equity securities are authorized
for issuance:
(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.
11
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.
12
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 provider of community based waste to energy installations
dealing with rubber waste at source while providing reliable electrical energy
to meet base load and/or on peak energy demands.
The successful implementation of the business plan will also be dependent on our
ability to meet the challenges of developing a management team capable of not
only the construction and operation of the first installation but also marketing
management and the implementation of specific marketing strategies. These
strategies will include the utilization of specific existing distributors
currently in the business of marketing carbon black. As well, we will be going
to regional disposal operators and collectors to offer our services as a point
of final disposition for their collection and disposal requirements.
Additionally, it will be necessary to educate targeted jurisdictions about the
environmental and commercial benefits of an Alliance installation in their
community.
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.
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.
Our independent auditor has expressed substantial doubt about our ability to
continue as a going concern. The notes to our financial statements include an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern. Among the reasons cited in the notes as raising substantial
doubt as to our ability to continue as a going concern are the following: we are
a development stage company with no operations, a stockholders' deficiency of
$109,666 and cash used in operations from inception of $511,908. As of March 31,
2005, we had a stockholders' deficiency of $294,892 and cash used in operations
from inception of $980,004. Our ability to continue as a going concern is
dependent on our ability to further implement our business plan, raise
additional capital and generate revenues. These conditions raise substantial
doubt about our ability to continue as a going concern.
We will receive proceeds of $2,676,502 from the exercise of the 2,676,502
warrants which are exercisable at $1.00 per share. In addition, we will also
receive also receive $1,250,000 from the exercise of the 200,000 Mirador
warrants which are exercisable at the following prices: 100,000 at $5.00 per
share and 100,000 at $7.50 per shares. Therefore, we will receive aggregate
proceeds of $3,926,502 from the exercise of the outstanding warrants.Any
proceeds from the exercise of the warrants will be allocated for general working
capital. We have agreed to pay all the offering expenses related to this
offering.
13
Plan of Operations
Management has developed forged relations with several corporate finance
entities that have expressed an interest in participating in our overall
expansion in the United States and Europe. In most cases, as a condition
precedent to their participation, we must be publicly traded or quoted on a
recognized stock exchange such as the OTC Bulletin Board.
We intend to seek a quotation of our common stock on the OTC Bulletin Board. We
will need to have an NASD registered broker-dealer file an application for such
quotation. There are no quantitative or qualitative requirements for a quotation
on the OTC Bulletin Board. 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.
In the event we are not able to raise $20,000,000 to complete construction of
our first showcase facility, we will be forced to seek additional financing in
order to maintain operations over the next 12 months. Our existing shareholders
have indicated a willingness to invest further capital in us.
In addition, we will continue to develop our industry contacts, develop our
business plan, refine our technology, search for suitable sites, and devote
efforts to securing the capital required to implement our business plan.
Second, our management and consulting engineers will commence activities to
enlarge our management team by adding key employees as well as consultants that
will be responsible for specific tasks & operations associated with the first
installation.
During the permitting period, estimated by management and their consulting
Engineers, to be 90 to 120 days, our engineering and fabrication team will
finalize design and layouts for the first site as well as prepare and circulate
site building bid documents. Similarly, turnkey contracts will be negotiated for
specific pieces of the thermal processing equipment utilized in the rubber to
oil conversion process. The supply and operation of the electrical generation
equipment will also be contracted out during this period of the development. We
have already identified and pre-qualified several suppliers of the type of
electrical generation equipment. However, as a result of the preliminary stage
of these discussions, we are unable to provide greater detail as to the exact
nature of the relationship or participation of these suppliers.
Also at this time, some preliminary site work will be completed to facilitate
the installation of the design/build structures required. The site will also be
prepared to accept the modularized electrical generation equipment that will be
installed on the site subsequent to the installation and start-up of the thermal
conversion process. The contracted operator of the electrical generation
equipment will also be responsible for the sale of electricity. During initial
discussions with these supplier/operators, an interest has been expressed in
participating in our overall business. Some discussions pertaining to the
exchange of our shares for all, or part, of the value of the turnkey have
transpired. However, it is unlikely that meaningful discussions will commence
until such time as our capitalization set forth above has been completed. Even
if the capitalization has been completed, there can be no certainty that the
contract operators will participate in the first installation other than on a
fee for services basis. In any event, until such time as the $20 Million
capitalization has been completed, specific details pertaining to the
participation of supplier/operators will not be available and we are unable to
provide the details of any possible forthcoming agreements.
Management and their consulting engineers believe that, the overall fabrication
and installation timeframe is approximately 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.
14
The entire project could be delayed as a direct result of several factors.
Should the Company not be able to a lease or purchase of a suitable property
within a timely manner, the project could be delayed indefinitely until such
time as an appropriate site is secured. Although the Company has located several
suitable sites that could be appropriately permitted, unforeseen regulatory
changes could make it difficult to obtain the required permits causing further
delays thereby causing the Company to take additional time to identify other
suitable sites. Should there be delays in the delivery of thermal processing or
electrical generation equipment as a result of material shortages, labor
problems, transportation difficulties etc., the commercial operation of the
Company would be delayed thereby not allowing the Company to generate revenues
as anticipated. Should the delay be lengthy, management could be required to
seek additional financing or seek other remedies in law pertaining to delivery
and performance failures of the fabricator suppliers. Regulatory changes causing
delays in the construction, processing equipment installation and start-up of
the showcase facility will lengthen the period of time for the Company to start
to generate revenues from operations. The Company will only be in the position
to commence a US expansion of processing facilities upon the successful
completion, start-up and operation of the showcase facility.
The supplier/fabricators will also be responsible for the training of key
employees and/or contractors and will work with the engineering project managers
to include established operating protocols in the systems operations manual. In
conjunction with this effort, during the start-up of the first installation,
fabricator/suppliers and the project management will establish operating set
points incorporating them into the system software thereby ensuring continued
reliable system performance and measurable quality standards.
It is management's and their consulting engineers opinion that overall, the
entire installation through construction completion, training, start-up and
commercial acceptance based upon engineering performance verification is
approximately 18 months. The overall development schedule could be delayed as a
result of unforeseen regulatory delays, labor disputes and seasonal delays due
to weather conditions.
Pursuant to preliminary discussions with corporate finance professionals, items
#16 through #18 set forth below are anticipated fees and expenses pertaining to
the $20 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's
future Vice President of Marketing with assistance from its future Vice
President of Technology will commence a specific and targeted marketing campaign
directed at the current rubber waste disposal infrastructure, regulatory
agencies, retail associations and the public. Promotional activities will
include media, public awareness, trade journals, seminars and meetings and
discussions with waste hauler and disposal companies. These activities will also
include meetings and discussions with state regulatory and enforcement
officials.
15
Based upon discussions with state regulators, it is the Company's belief that
all communities in the United States and Canada are being encouraged by state,
provincial and federal authorities to be more environmentally responsible. An
example of amplified environmental concern occurring in 2004 was the State of
Michigan's position pertaining to the continued dumping of waste from
out-of-state communities that included Toronto, Ontario, Canada. State
regulations were implemented in an attempt to curtail the amount and sources of
waste being disposed at Michigan dump sites. It is managements belief, that
since the early 1990s the federal EPA has been concerned with the interstate
transportation of waste. The federal position seems to be that communities that
generate should be responsible for the ultimate disposition of the waste within
their municipality. A attempt to limit interstate transportation of waste was
contained in the Interstate Modal Transportation Act which was never approved.
Community based environmental initiatives are being encouraged. Dealing with
waste at the source is considered much more environmentally friendly than
trucking the waste hundreds of miles away. The first installation is perceived
as a convenient and environmentally friendly solution to rubber waste. The
targeted marketing campaign will exploit the current thinking pertaining to
community based waste reduction and processing and waste to energy initiatives.
However, there may be difficulties associated with encouraging the existing
disposal and transportation infrastructure to utilize the Alliance installation
as an alternative to their current method of disposal. Historic relationships
between the existing infrastructure serving retailers and dumps or processors
often hundreds of miles away and the financial commitment to the trucking the
waste may be difficult to overcome. However, management's discussion with
several haulers has been encouraging as a cost effective alternative to the
existing transportation of waste to often out-of-state locations is a welcomed
alternative.
A targeted marketing campaign pertaining to the sale of carbon black and scrap
steel will also commence prior to completion of construction. However, the
Company may not be positioned to enter into carbon black supply contracts until
such time as samples are made available from the operation of the showcase
facility. It is likely that these samples would be made available as a result of
operation the processing equipment during the performance testing phase of the
installation and immediately prior to commercial certification. The commercial
certification will occur after the equipment has operated for a period of
approximately 90 days and all contract performance specifications have been
achieved. There may be delays associated with the correction of deficiencies in
order that the processing equipment meet certain performance standards prior to
commercial certification. However, the Company has included the 90 day start-up
phase within the overall timeline to allow for the correction of deficiencies by
fabricator suppliers. Although the vast majority of the rubber to oil system is
based upon off-the-shelf components, if further delays occur as a result of
fabricator suppliers correction of deficiencies, the Company could be delayed in
its ability to generate revenue.
Although, we have identified several experts currently responsible for the sale
of carbon products currently with other companies and they have expressed an
interest in the position of VP Marketing, there is no guarantee that their
previous experience will allow them to successfully initiate a campaign that
will lead to the sale of the Companies carbon black. However, the successful
operation of the thermal system will generate commercial grades of carbon black
that could be utilized by rubber formulation companies for specific products.
Additionally, the Company's carbon black could be blended with other sources of
carbon black thereby allowing rubber formulators to meet customers requirements
for recycled content. We believe our carbon black will be advantageous to other
forms of recycled content as it will be is a virgin product made from oil that
is a waste rubber derivative.
16
Furthermore, the heat recovery system utilized through the entire system will be
ready to deliver hot water and/or steam to a greenhouse operator. Although we
have yet to complete an agreement with a hydroponics greenhouse operator,
preliminary discussions with several current operators would indicate that the
availability of a reliable discounted heat source for the production of hot
water, could be a cost effective alternative to their current consumption of
non-renewable resources to fuel boilers to generate the required hot water.
The ARC installation is designed to operate continuously. As a result, the
installation has the ability to produce heat constantly to service the hot water
requirements of a hydroponics operator or other commercial uses. The heat
produced can be considered a bi-product from the operation of the thermal
conversion and electrical generation equipment. Rather than utilizing the heat
source for any particular use, the Company could use a commercial cooling tower
to cool the thermal processing equipment and could decide not to operate the
heat recovery system components associated with the reciprocating engines
responsible for the generation of electricity. However, management believes that
utilizing the bi-product heat capacity in an environmentally friendly way is a
common sense alternative to exhausting heat into the atmosphere. It is the
belief of management, our consulting engineers and the several of the
hydroponics operators that have discussed our ability to generate heat, that a
15 to 20 acre hydroponics greenhouse could be heated from the heat recovered
from the thermal process heat recovery boiler in combination with the heat
available from standard heat recovery mechanisms that are part of the
reciprocating engines driving the alternators making electricity.
The type of relationship discussed is based upon the notion that the hydroponics
greenhouse operator would lease a site immediately adjacent to the showcase
facility. Based upon our final equipment selection, pertaining to both the
thermal conversion of rubber to oil and the generation of electricity, the
Company will be positioned to provide details as to the amount of steam and/or
hot water that be generated for conveyance to the greenhouse via an insulated
pipeline. A heat exchanger will transfer the heat from the ARC steam and/or hot
water to the hot water in the hydroponics operator's underground reservoir. The
ARC cooled condensate and/or water will be returned to the ARC via the
aforementioned pipeline heated again and once again returned to the greenhouse
in a closed loop system.
Several methods of compensation for ARC heat sources have been discussed. These
include a percentage of the hydroponics greenhouse gross or not sales and
discounted avoided cost which is the operators cost of natural gas or fuel oil
less a negotiated discount. The Company will not be positioned to enter into
specific negotiations until such time as the $20 Million financing has been
completed.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
17
BUSINESS - OUR COMPANY
A SUMMARY OF WHAT WE DO
About Us
On November 6, 2001, we were incorporated in the State of Delaware under the
name American Resource Recovery Group Ltd. On April 18, 2002, we filed a
certificate of amendment changing our name to Alliance Recovery Corporation. On
April 22, 2002, we filed another certificate of amendment to increase our
authorized shares to 10,000,000, par value $.01. Finally, on July 7, 2004, we
filed a certificate of amendment increasing our authorized shares to
100,000,000.
We intend to implement suitable resource recovery technologies and strategies
(the "ARC Process") to convert industrial and other waste materials into
electrical energy for sale to specific industrial entities or into local power
grids, and to produce for re-sale by products including carbon black, steel, and
steam and/or hot water. We will be able to undertake this after we raise $20M
and construct our first facility. We anticipate raising the $20M within the next
6 months and then taking 18 months to construct the first facility.
We believe that management and our third party consulting engineers have
identified a one-step manufacturing process based upon the utilization of
existing manufacturing processes to efficiently convert rubber wastes of all
kinds including scrap tires into fuel oil, for electrical power generation, with
minimal if any negative impact to the environment. We believe this system may be
patentably distinct, however, the system components are available commonly from
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 (Chemical Economic
Handbook).
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 (the source
of this Information is Chaz Miller of Environmental Industry Associations as
reported by Wasteage.com on June 1, 2003). Of the 292 million scrap tires, cars
contribute two-thirds of scrap tires, the remainder comes from trucks, heavy
equipment, aircraft, off-road and scrapped vehicles.
The aforementioned number of scrap tires generated is equivalent to
approximately 1 scrap tire for every person living in the U.S. today. In
Michigan, Ohio, New York, Pennsylvania, and the province of Ontario, the
population is well over 50 million, and all these major states are connected to
Lake Erie . We have identified suitable sites with port locations in the great
lakes region to allow for the utilization of tug and barge transportation which
continues to be the most inexpensive form of transportation for large volumes of
freight.
18
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.
19
One Step Manufacturing Process
Our thermal system has the ability to thermally reduce the rubber waste, utilize
the light aromatic volatile gases produced during the reduction/conversion
process as fuel for the conversion furnace and separates out the oil which is
ultimately used as fuel for the reciprocating engines generating electricity. As
the furnace (process reactor vessel) process is based upon the chemistry and
operational parameters utilized in the carbon black industry, a portion of the
oil is burned in the process fuel gases. Similar to the operation of carbon
black processing furnaces (process reactor vessels) the automated system
controls maintain optimum thermal conditions (process time, temperature and
turbulence) for combustion of the oil. The combustion generates more heat to
support the overall process and leaves behind a small particle of a black soot
like substance called carbon black which is carried away in the exhaust flow
where it is ultimately separated from the exhaust in a bag house (filter),
collected, pneumatically conveyed, palletized and sent to a storage silo. The
rubber, which is not pretreated or shredded (whole tires can be utilized) is fed
continuously into the furnace (process reactor vessel) and the thermal reaction
is maintained by the automated control system. During the reduction (conversion)
of the rubber to oil process, the steel contained in particularly waste tires,
is collected and conveyed hydraulically through the process to and exists the
process, where it is cooled, baled and stored.
All of the aforementioned thermal reduction and occurs almost contemporaneously
within the process furnace (process reactor vessel) and ancillary equipment
associated with its operation. The Alliance thermal system is not based upon
conventional pyrolysis.
Almost all current thermal operations are based upon the utilization of a
pyrolytic reaction. In simple terms the pyrolytic oven bakes rubber down into a
homogeneous mass which requires secondary processes to separate out the various
materials left behind in the reduction process. Additionally, the reduction is
at an extremely low temperature that does not generate carbon black. There is
tremendous amount of ash generated in the process that combines with the carbon
char. In order to separate the char from the ash additional processes are
required. Furthermore, additional high temperature processes are necessary to
upgrade the char to a marketable form of carbon black as there are extremely
limited markets for char. These additional process require additional fuel
making the entire process marginal from a financial perspective. Additionally,
the rubber waste in the majority of operation requires shredding and often the
removal of the steel in the rubber prior to shredding. All of above process are
required by most pyrolytic systems that management and their consulting
engineers are aware of at this time. There may be new types of systems developed
that are based upon the pyrolytic model, however it is management's opinion that
the costs associated with numerous steps involved will make it difficult, if not
impossible for these type of systems to operate commercially. The costs
associated in the separation of the various products collected from the
homogeneous mass from the process reaction, in addition to the secondary
processing requirement of the char to allow it to be sold commercially, have
made pyrolysis based thermal processes marginal commercial successes. To further
exacerbate the overall high processing costs are the additional costs associated
with the pre-treatment of the rubber being conveyed into the pyrolysis oven.
Generally, the pre-treatment requires the shedding of the rubber waste and
frequently in the case of waste tires requires the removal of the tire bead wire
either by mechanical processes or a magnetic system.
Alternatively, the Alliance thermal system requires no pre-treatment of the
rubber waste. Whole tires can be conveyed into the system thereby eliminating
all costs associated with the handling shredding, and shred storage of the
rubber waste prior to thermal processing. Furthermore, the chemical
manufacturing process utilized in the Alliance process, separates the various
residual products as they are formed and released into the system eliminating
the need for additional process separation systems. It is management's opinion
that the simplicity of the Alliance thermal system makes it a cost effective
alternative to conventional pyrolysis operations.
20
PRODUCT DISTRIBUTION
Our future Vice President of Marketing working in conjunction with our future
Vice president of Technology will also develop and implement campaigns related
to the sale of the Company's various byproducts. A targeted marketing campaign
pertaining to the sale of carbon black and scrap steel will also commence prior
to completion of construction. However, we may not be positioned to enter into
carbon black supply contracts until such time as samples are made available from
the operation of the showcase facility. It is likely that these samples would be
made available as a result of operation the processing equipment during the
performance testing phase of the installation and immediately prior to
commercial certification. The commercial certification will occur after the
equipment has operated for a period of approximately 90 days and all contract
performance specifications have been achieved. There may be delays associated
with the correction of deficiencies in order that the processing equipment meet
certain performance standards prior to commercial certification. However, the
Company has included the 90 day start-up phase within the overall timeline to
allow for the correction of deficiencies by fabricator suppliers. Although the
vast majority of the rubber to oil system is based upon off-the-shelf
components, if further delays occur as a result of fabricator suppliers
correction of deficiencies, the Company could be delayed in its ability to
generate revenue.
Although we have identified several experts currently responsible for the sale
of carbon products currently with other companies and they have expressed an
interest in the position of VP Marketing, there is no guarantee that their
previous experience will allow them to successfully initiate a campaign that
will lead to the sale of the Companies carbon black. However, the successful
operation of the thermal system will generate commercial grades of carbon black
that could be utilized by rubber formulation companies for specific products.
Additionally, the Company's carbon black could be blended with other sources of
carbon black thereby allowing rubber formulators to meet customer's requirements
for recycled content. Alliance carbon black is advantageous to other form of
recycle content as it is a virgin product made from oil that is a waste rubber
derivative.
The sale of steam and/or hot water will occur as a result of a marketing effort
to identify and enter into discussions with an existing hydroponics greenhouse
operator that desires to enter into a relationship with the Company to move into
specific jurisdiction where ARC facilities will be located immediately in, or
adjacent to large metropolitan centers. Management discussions with several
greenhouse operators suggests that in addition to the availability of discounted
heat from the Company, hydroponics greenhouse operators like to distribute
product from operations that are positioned adjacent to large markets. Although
we have yet to complete an agreement with a hydroponics greenhouse operator,
preliminary discussions with several current operators would indicate that the
availability of a reliable discounted heat source for the production of hot
water, could be a cost effective alternative to their current consumption of
non-renewable resources to fuel boilers to generate the required hot water.
PROCESS OF TIRE DERIVED FUEL
At the present time, shredding tires removes the hollow donut shaped tire from
the environment which in many jurisdiction is considered public health risk.
Waste tires, when left in dumps or collected out of doors collect water. The sun
heats the tire and water up in the daytime hours and the density of the rubber
holds some of the heat at night. As a result the water in the waste tires
becomes an ideal breeding ground for mosquitoes. There remains an extreme public
health concern pertaining to diseases carried by mosquitoes. When waste tires
are stored near urban areas they become a public health concern thereby making
it necessary for waste operators to shred the tire so water cannot be collected.
As a result, a significant investment has been made by these operators in
shredders to support their operations. The cost of maintaining and operating the
shredder appears to be significant. Management believes that the cost of
shredding each tire can in some jurisdiction be equivalent to the disposal fee
making it necessary for operators to rely on the sale of tire derived fuel to
sustain their economic viability. However, our consulting engineers have advised
the Company that in almost all jurisdictions in the United States the blending
of TDF with coal or other fuels is limited to 10-15 % of total fuel consumed.
Our consulting engineers have also advised Management that to dispose of
shredded rubber, shreds are now being mixed with soil used to top dress
municipal waste sites. Obviously, once mixed with soil at a landfill site, the
oil resource in the rubber waste is no longer recoverable.
21
The fuel in TDF is simply as a result of the combustion (burning) of the rubber.
Catastrophic tire fires that have occurred in the US and around the world have
clearly demonstrated that rubber can burn and generate vast amounts of heat as a
result. As the rubber is consumed in the fire, it releases both oil and gases
that are highly volatile making the rubber a good fuel. However, as also
witnessed in tire uncontrolled fires, a tremendous amount of black soot, gases
and ash are released into the atmosphere. It is the material that is ultimately
released into the atmosphere that limits the amount of rubber that can be
blended with other fuels. Exhaust scrubbing systems intended for a specific fuel
are easily overloaded with the emissions from the burning of TDF.
It will be necessary for management to carefully examine the disposal methods
being utilized in a jurisdiction, including TDF production, prior to committing
to a particular site. The cost associated with breaking into a market that has
invested in shredding could be significant.
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 familiar with the successful commercialization of
leading edge technologies, has been responsible for 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.
22
Research and Development
The entire research and development effort has been supported by Mr. Vaisler &
his family prior to our incorporation. It commenced over 9 years ago. It is
impossible to estimate the number of hours of R&D activity pertaining to the
development of our business and technology. Furthermore, we have also relied on
the R&D of other groups to augment our overall R&D efforts with off-the-shelf
technology and processes, that are currently commercially available.
Financing
- ---------
We intend to complete a $20,000,000 financing (private placement of debt/equity)
in order to construct the first facility.
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.
Our expansion into these high-density population areas in the U.S. will position
us as a convenient and cost effective alternative to the customary practice of
hauling the waste rubber long distances to permitted disposal sites. Extensive
public education campaigns will be targeted at these urban centers to raise the
level of awareness pertaining to responsible disposal of rubber waste by having
communities become a part of the "environmental alliance". Awareness campaigns
involving the public, retailers, state legislators and regulators will be
utilized to market ARC installations as a final point of disposition for rubber
waste within communities (target locations) where the waste is generated.
Based upon the first facility, each ARC Unit's disposal capacity will be capable
of processing 100,000,000 pounds of waste rubber annually. This is equivalent to
approximately 5,000,000 passenger tires. Normally, within the industrial makeup
of these communities, there are numerous industries requiring the carbon black,
steel and steam and/or hot water available from our processing system.
Discussions with a greenhouse operator have commenced to locate hydroponics
operations immediately adjacent to ARC installations. ARC will provide the
hydroponics operations with heat recovered from the overall ARC process thereby
minimizing any contribution to global warming. In the simplest of terms, the
hydroponics green house acts like a radiator for the reciprocating engines
making electricity, as well as acting as the radiator for the rubber to oil
conversion process. ARC installations will provide required disposal
infrastructure to select urban areas where large volumes of scrap rubber are
generated and there are few, if any, points of final disposition for this waste.
The obvious benefit to these urban centers is the minimization of transportation
pertaining to disposal and the additional positive environmental impact
associated with community based disposal and the production of electrical energy
to meet soaring demands without the consumption of non-renew resources.
The Rubber Manufacturers Association suggests that in their report, US Scrap
Tire Markets, 2003 edition, that as many as 290 Million tires are disposed of
every year in the US. That is approximately tire for every man women and child
in the US today. We plan on locating on a site with access to the Great Lakes,
so that in the event sufficient tires were not immediately available from the
immediate jurisdiction surrounding the installation, marketing efforts could
extend to other states connected to the Great Lake system. The densely populated
areas on the southern shores of these lakes, referred to as the "rust belt" and
Ontario to the north could all support an ARC installation on their own. The
populations of the entire area is as follows:
Michigan 10,050,446
Ohio 11,421,267
New York 19,157,532
Pennsylvania 12,335,091
Ontario 12,439,800
23
Product, Markets, & Services
- ----------------------------
The North American carbon black consumption is approximately six (6) billion
pounds annually, and the global consumption of carbon black is approximately
17.2 billion pounds annually. Our energy and carbon black process innovation
provides a technically and economically viable industrial solution to waste
rubber disposal which is a major global environmental issue in the U.S. and
internationally.
We will generate electrical energy for regional use and supply 700 series carbon
black to the rubber formulation and product industry. Carbon black can also be
blended with the product of larger manufacturers of carbon black to facilitate
EPA and state environmental "efforts" to include scrap rubber derivatives in new
rubber formulations. According to the technical representatives of ITRN, a
manufacturer of rubber formulations, customers are now demanding as much as 25%
recycled content in rubber compounds. The use of carbon black manufactured from
a feedstock oil derivative from waste rubber, does not impact upon the overall
quality of the rubber ultimately produced. According to ITRN technical
representatives, there are significant quality issues related to the use of
recycled crumb rubber in rubber formulations they produce. At present,
approximately 95% of the US carbon black market is controlled by five (5)
manufacturers.
The ARC Process will have the capacity to manufacture up to 14,000,000 lbs. of
carbon black annually from the rubber-to fuel oil conversion processes. This
represents only a fraction of carbon black consumed in the growing U.S. market.
In addition to the production of carbon black, the thermal reduction of rubber
in the process system will also generate quality additional residual
by-products. As well as the production of gases which are used as fuel in the
process, approximately 90,000 barrels of No. 4 grade fuel oil for energy
production and 2,300 tons of scrap steel are generated annually, which all
contribute to our projected profitability. Carbon black and steel are products
that can be sold into existing domestic and international markets.
The addition of oil burning reciprocating engines to make electricity is a
natural addition to the ARC process and will provide an additional $3,000,000 in
net revenues for us. By consuming the oil generated in the process, the facility
is capable of generating electrical energy with a baseload of 8 MW. Thus, by
recovering the oil and gases from thermally decomposed waste rubber and
producing 14,000,000 pounds of carbon black annually, this technology will be
saving the oil and gas non-renewable resources needed to produce an equivalent
amount of carbon black from a conventional manufacturing process while also
using the surplus fuel oil to make electricity. We are also prepared to operate
the electrical generation capacity as a peaker, supplying electricity during
peak usage periods at prices that can be three to four times the basic rates.
The entire electrical generation business component will be managed by an
electrical utility company ultimately contracted to operate our generation
capacity.
To determine the revenue potential from the sale of electricity, we have
considered current electrical rates offered by Detroit Edison. Detroit Edison
rates for residential and commercial consumption range from $ .08286/kwh to $
..09696/kwh. In discussions with various operations and management companies, we
were advised that the wholesale rate of baseload in Michigan is $0.0656/kwh.
Total revenue is calculated as follows:
8000kwh x 24 hours = 192000kwh/Day 192,000kwh/Day x 325 Days/year =
62,400,000kwh/Year 62,400,000kwh/Year x $0.0656/kwh = $4,093,440/Year
Although there are no final agreements in place, during discussions with
contract operators and management companies, we were advised that payment for
their services to operate the entire electrical generation facility as well as
to sell the electricity is up to $0.01kwh.
62,400,000kwh/Year x $0.01/kwh = $624,000
Based on the above, annual net revenues of $3,469,440 can be anticipated.
We have rounded the net revenue figure down to $3,000,000
24
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.
In an attempt to generate opportunities to utilize waste rubber, like scrap
tires, in various new products which include rubber shreds, go into jogging
mats, mud flaps, stable mats, pickup bed liners, and many similar products.
Ultimately, however, these consumer goods will be disposed of in a landfill. The
donut shape of the tire has been changed, but the problems associated with
appropriately disposing of the waste remains. Rubber products in landfills
cannot be recovered, thereby making it impossible to recover the hydrocarbon
resource available in the waste rubber.
Steel recovered from the thermal reduction/conversion process is ultimately put
into new steel products. Most metals today are recycled, so it is highly
unlikely that the recovered steel would ever find its way into a landfill. The
ARC process results in the total consumption of rubber waste. The marketable
by-products include electrical energy, carbon black, steel, thermal energy/hot
water, none of which results in rubber landfill, and all of which are, in fact,
recyclable consumer goods.
The ARC manufacturing process does not qualify as a federally regulated source
of emissions. Only state and local approvals are required. ARC's ability to
permit facilities in large urban centers will allow the Company to establish a
network of facilities in communities where rubber waste is generated rather than
hauling this waste hundreds of miles for shredding to TDF (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
electricity has come to the forefront of public concern, as a result of the
State of California energy crisis in the winter of 2001 and industry
de-regulation in the U.S. and Canada.
We believe that our emissions will be well below the Federal Guidelines. As such
we believe that we will not be a federally- regulated source of emissions. Based
on previous process studies, the ARC Process to produce oil, carbon black, and
steel from used tires is not expected to create emissions of a quantity and type
that will be large enough to trigger a Federally-mandated Title V "Renewable
Operating Permit." The Michigan state-required "Permit to Install/New Source
Review" program will require that a state-issued permit be applied for.
The electric generating process utilizing the produced oil in engine-driven
generators may fall within other regulatory guidelines that require additional
permitting measures such as a "Renewable Operating Permit," whether or not the
emissions are above certain thresholds. Requirements for such permits depend on
certain factors unrelated to emissions limits, such as the percentage sulfur
content in the oil, the rated capacity of the generator, or whether the
electricity is sold publicly. Also, certain guidelines regarding Nitrogen and
Sulfur oxides and overall emissions from electric generating facilities are
federally mandated, but are implemented through state regulations. Therefore,
the state would issue such a permit, if one is needed. Certain of these
guidelines relate to "fossil-fueled" generators, but it is not yet established
whether the state would consider the tire-derived oil to be "fossil." It may be
noted that the emissions regulations regarding such electrical generating
facilities are yet evolving, with changes as recent as 2004.
25
Typically, states and/or localities regulate employee relations, zoning, noise,
aesthetics, lighting, parking, fencing, signs, odors, fire prevention devices,
nuisances, roadway access, plumbing, electrical, and other building codes. These
types of regulations may require specific design attributes for the site,
building, and equipment. There are no known special regulations at this site
that would create abnormal difficulties over and above those encountered in the
development of any other industrial site and have been anticipated in the
budgets that have been prepared.
We also have to meet the following federal regulations:
a. The facility would have to meet OSHA-mandated safety guidelines, and
EPA-mandated Storm Water runoff guidelines. These programs are
implemented by the State of Michigan and are typically required for
all industrial and/or commercial operations that meet the reporting
guidelines.
b. If the facility discharges process water into a local sewer system, it
will need to meet any pretreatment guidelines established by the
locality.
c. The only Federally-implemented discharge program known to apply is the
(40CFR112) Oil Pollution Prevention and Response regulations, which
require most oil storage facilities to be constructed to good
engineering practice, including dikes, and to have a Spill Prevention
Control and Countermeasures (SPCC) Plan. d. It is currently unknown
what, if any, impact that evolving Homeland Security actions and
guidelines would impose on industrial operations such as ARC proposes
to build and operate.
The Industry
ARC installations will provide a final point of disposition for waste rubber
either in, or immediately adjacent to, the communities where the waste was
generated. Generally, the U.S. waste industry is not prepared to address the
problems associated with specific kinds of waste rubber and particularly scrap
tires. The carbon black industry has manufactured carbon black for 80 years by
burning a fuel oil. Industry estimates indicate that approximately 7 billion
pounds of carbon black are consumed in the U.S. each year with global
consumption at 17 billion pounds. Carbon black manufactured by us will be sold
into existing U.S. and international carbon black markets and be produced as a
result of the thermal reduction of rubber waste to fuel oil, the oil thereby
being the feedstock for carbon black production. The surplus fuel oil can be
used to fuel generators to make electrical energy. We will be uniquely
positioned in several industries: rubber waste disposal, manufacturing, and
power generation.
As rubber waste is the source of fuel oil, it is important to understand the
waste industry as it relates to scrap tire disposal which will constitute a
significant volume of the waste rubber processed at an ARC installation. Scrap
tires are a major environmental problem. It is estimated by the United States
Environmental Protection Agency (the "EPA") that there are over 1.5 to 3 billion
used tires in landfills and stockpiles in the United States and that an
additional 292 million tires are discarded in the United States every year.
"Disposing" of tires by stockpiling is not a viable long-term solution because
of fire hazards and the likelihood of spreading disease. "Disposing" of whole
tires in landfills is, generally, prohibited or restricted by regulation.
Scrap Tire Distribution Chain
In general, the scrap tire distribution chain consists of the tire end-user
(business or consumer), new tire retailers, used tire brokers, solid waste
disposal companies, haulers and tire processors. Most scrap tires are originally
obtained by new tire retailers from consumers who may pay the retailer a fee for
"disposing" of their used tires. Retailers may pay either a scrap tire broker, a
solid waste disposal company, a hauler or a tire processor to remove scrap tires
from their place of business. Scrap tire brokers typically retain some tires for
resale as used tires and pay either a waste disposal company, a hauler or a tire
processor to remove the remaining scrap tires from their place of business.
Solid waste disposal companies may stockpile scrap tires or pay a processor to
dispose of their tires. Haulers transport scrap tires between parties in the
distribution chain and may also act as a used tire broker or other party in the
distribution chain. Not until a tire processor processes the scrap tires are the
tires ultimately disposed of.
Our products and services include:
26
Tipping Fees
The fees paid by those who have scrap tires for their ultimate disposal are
referred to as tipping fees. Tipping fees will be an important source of revenue
for Alliance. As of May, 1991, 21 states had special fees for tires or vehicles.
Some states have enacted legislation which directly mandates the payment of
tipping fees. Other states have implemented programs which make funds available
for the payment of tipping fees. For instance, some states raise funds, through
retail taxes on purchases of new tires or through annual motor vehicle license
fees, which are specifically allocated to the disposal of tires. These states
often bear the responsibility for disposing of tires directly and use the funds
raised from the net proceeds of the particular program to pay for such disposal.
Other states provide for a tax to be paid by purchasers of new tires, to be
retained by the retailer selling the tire, who must in turn pay for the disposal
of such scrap tires. Other states rely on the market to regulate tipping fees.
We estimate that in large urban cities, average tipping fees could be as much as
U.S. $3.00 to $5.00 per tire. In our financial projection, we have budgeted
tipping fees at U.S. $0.85 per tire.
While determining the ideal jurisdictions for ARC installations, it was
concluded that locating an ARC facility as close as possible to where the rubber
waste is generated had a significant positive impact on the environment as it
would greatly reduce the requirement to transport the waste, often several
hundred miles, to a facility for sorting and some form of processing prior to
final disposition. The emissions associated with transportation of the rubber
waste as well as wear and tear on the roadways as well as the cost of
transportation all negatively impact the vast majority of current rubber waste
disposal scenarios. Rubber waste is generated where people live. As a result,
large metropolitan centers generate vast quantities of rubber waste that
generally requires some form of truck transportation prior to final disposition.
The costs associated with collection, sorting, transportation and final
disposition are significant.
Our examination of these larger metropolitan jurisdictions included discussions
with retail operators. As an example, in the cities of New York & Baltimore and
their surrounding communities, retail operators were charging purchasers of new
tires $3.00 to $5.00 /tire as a disposal fee. The vast majority of those
retailers charged $5.00/tire for a passenger tire equivalent (PTE). A passenger
tire equivalent is approximately twenty (2) pounds and the disposal fee
nationwide is based upon PTEs. Larger light truck, heavy truck and off-road
vehicle tires are charged significantly more as a result of their size, weight
and conveyance characteristics. Obviously, a larger off-road tire, weighing
several hundred pounds is extremely difficult to handle and convey.
Within the large metropolitan centers there exists a disposal infrastructure
currently servicing the retailers. This infrastructure of truckers, waste
operators and small independents routinely travel to retailers to pickup waste
tires. Retailers pay a disposal fee to have the waste tires removed and
transported. A portion of the disposal fee pays for conveyance and the balance
covers the ultimate disposition of the waste tire.
Although we recognize that disposal fees charged by scrap tire collectors at
final points of disposition are significantly higher than $.85, management has
deliberately been extremely conservative in projecting incomes based upon the
$.85/PTE for final disposition. Furthermore, management believes that a lower
fee will encourage the existing disposal infrastructure to utilize an ARC
facility's capacity either in or immediately adjacent to a large metropolitan
center rather than the current practice of hauling the waste often several
hundred miles, or in some cases, to out-of-state disposal operations.
Sale of the Recovered Steel
Approximately one pound of steel can be recovered from each scrap passenger
tire. Scrap steel can be used as an input into carbon steel manufactured by
steel mills. A recent expansion of the number of small-scale "mini" mills
catering to local markets has increased local demand for scrap steel. Scrap
steel is also sold into export markets, notably Japan. International demand for
United States scrap steel has had a positive impact on the demand for and price
of scrap steel. Although the U.S. steel industry is in decline, demand for scrap
steel remains significant with regional prices varying from U.S. $65.00 to
$124.00 per ton. In our financial projections, the realizable price for scrap
steel produced was budgeted at U.S. $65.00 per ton. Based on inputs of 4,600,000
tires annually, each ARC Unit will be designed to produce approximately 2,300
tons of scrap steel per year.
27
Sale of the Manufactured Carbon Black
As the rubber is thermally reduced to fuel oil, approximately 14 million pounds
of commercial grade carbon black is expected to be manufactured. Carbon black
can be sold to industry for reuse as a re-enforcing agent in synthetic rubber
compounds for inks, paints, plastics, radiator hoses, fan belts, trim rubber,
floor mats, etc. Because the principal use of carbon black is as a raw material
in automotive parts, demand for carbon black is dependent on the automotive
industry. Also, since carbon black is derived from petrochemical products, its
price is susceptible to variations in the price of oil. According to the
Business Intelligence Center report at Reed Business Information as of 12/31/04
the US national average for Carbon Black was $.45/lb The manufactured price of
carbon black is directly related to the price of a barrel of oil. In our
financial projections, the realizable price for carbon black produced was
budgeted at U.S. $0.22 per pound. Based on inputs of 4.6 Million tires annually,
each ARC Unit is designated to produce approximately 14 million pounds of carbon
black per year.
The thermal conversion chemistry maintained within the manufacturing furnace of
the ARC unit, is based upon existing manufacturing methods utilized by
conventional carbon black manufacturers. This chemistry has been utilized for
approximately 80 years in carbon black manufacturing facilities around the
world. By controlling the time, temperature and turbulence within the furnace,
commercial grades of carbon black can be produced.
Based upon the amount of oil generated by each PTE, management and their
engineering consultants after examining conventional carbon black manufacturing
methods and chemical reactions believe that the least amount of carbon black
that could be generated is approximately 3 pounds. For the purpose of
understanding this projection consider that each hour 1800 pounds of carbon
black are generated utilizing the aforementioned carbon black manufacturing
conditions maintained in the process furnace. To continue being conservative in
this projection it has been determined that the total number of hours the ARC
facility will operate in 1 year is equivalent to 325 days. Similar to other
carbon black or thermal processing manufacturing facilities, the ARC facility
will be operated 24 hours/day producing 14,040,000 of carbon black annually
(1800x24x325=14,040,000).
Sale of Steam and/or Hot Water
Steam and/or hot water can be sold to industry or greenhouse operators at the
avoided cost.
We have had discussions with hydroponics greenhouse operators pertaining to a
co-location of a greenhouse immediately adjacent to the Alliance showcase
installation. Hydroponics greenhouses require vast amounts of hot water which is
generally generated from the consumption of natural gas or fuel oil that fuel
boilers within the greenhouse complex.
An ARC installation has the ability to recover heat from both the rubber to oil
conversion and the generation of electricity. Several of the turn-key electrical
generation systems identified by us are equipped with standard heat recovery
technology capable of producing steam and/or hot water. The heat recovery
equipment can be utilized to produce steam and/or heat hot water or can also
heat an oil product. Ultimately, the distance from the greenhouse operation
determines whether one uses hot water, steam or oil. Hot oil can retain heat
longer and can be sent a greater distance than steam or hot water. The steam
and/or hot water or heated oil can be transferred in an insulated piped to the
adjacent greenhouse operation and subsequently put through a heat exchanger to
heat the hot water reservoir maintained at the hydroponics operation.
The sale of heat to the greenhouse operator at their avoided cost of production
less an appropriate discount can provide an additional source of revenue,
although we have not factored revenues from the sale of heat into the Financial
Projections.
Consulting Agreement with Mirador Consulting, Inc.
On January 14, 2004 we signed a one year consulting agreement with Mirador
Consulting, Inc. to provide management consulting, business advisory,
shareholder information and public relations and other related services as
needed. Under this agreement we issued 200,000 shares of our restricted common
stock to Mirador and 200,000 warrants exercisable. The 200,000 warrants are
exercisable in the following manner: 100,000 at $5.00 per share and 100,000 at
$7.50 per share. The 200,000 shares of restricted common stock and the shares of
common stock underlying the warrants have been registered as part of this
registration statement. In addition, we paid Mirador $4,000 a month during the
term of the agreement. On January 14, 2005, we signed a new consulting agreement
with Mirador which commenced on January 14, 2005 and terminates on January 14,
2006. Under this agreement, we agreed to issue an additional 300,000 shares of
our restricted common stock to Mirador. The additional 300,000 shares are not
being registered as part of this registration statement. We have also agreed to
pay Mirador a monthly fee of $2,000.00 per month.
28
The payments were made in connection to their assistance formulating corporate
finance strategies, assistance in finding an appropriate Auditor, assisting both
we and the ARC Website developer in the preparation and presentation of graphics
and text, and introductions to other individuals in a position to assist us
including a market maker and financial analyst.
Mirador also coordinated meetings and discussions with broker dealers to assess
their overall reation to the ARC business plan and subsequently made
recommendations pertaining to the development of specific marketing material to
be utilized in corporate finance presentations.
In the future, we will continue to utilize Mirador for both stock promotion and
investor relations initiatives. A new engagement agreement for their continued
assistance is being discussed at this time.
Intellectual Property
The necessary technology that is required for our operation is presently owned
by Peter Vaisler. While employed by us, Mr. Vaisler will provide us with such
technology at no cost to us until the end of his employment term. In the event
Mr. Vaisler is no longer employed by us, the technology that he has provided to
us may be used by us for a one time fee equal to the current replacement value
of such technology determined by an engineer's opinion acceptable to both
parties. We may terminate Mr. Vaisler's employment agreement for "cause." Either
party may terminate the employment agreement with thirty (30) days prior written
notice to the other party.
As a result of discussions with patent attorneys, we believe that the rubber to
oil system components may be patentably distinct. However, we have also advised
to treat the main rubber to oil system components as a "black box" and to seek
patent protection on both the feed side and exhaust side of the process furnace
immediately prior to going from final fabrication design to actual equipment
fabrication. As a result of secrecy agreements with our consulting engineers and
the overall system engineering team, all intellectual property developed as a
result of their efforts are our property. In any event, we should not to proceed
with patent protection or not be able to obtain patent protection, it is highly
unlikely that our business would be negatively impacted. The length of time it
would take a competitor to replicate and integrate the various system components
would be lengthy. Raising the capital required to develop a competitive system
would also be a lengthy process. During that period, we would have already
established ourself in targeted markets.
We presently have no copyrights, patents or trademarks.
EMPLOYEES
As of June 9, 2005, we have no employees. Peter Vaisler will become our first
full-time employee when this registration statement is declared effective. We
have no other firm commitments for employment. 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. This will be undertaken as
follows:
We will operate processing facilities as subsidiaries. Each subsidiary will be
required to have the following fulltime employees:
General Manager $ 75,000
Secretary $ 30,000
Bookkeeper $ 30,000
3 Shift Supervisor/System Operators $150,000
5 Machinery Operators $180,000
5 Production/Packaging $150,000
3 Maintenance Mechanics $120,000
Although the management team will be augmented by specific consultants to
address technical, compliance and engineering issues, the ARC corporate offices
will require a management team to support the installation, start-up,
operations, sales of disposal services, product sales, and finance of the
initial showcase facility and any subsequent installations, in addition to all
corporate matters including regulatory and compliance issues.
29
Once the registration statement is declared effective, the President & CEO will
initially augment the management team with CFO/Business Manager. Reporting to
the President, the CFO/Business Manager will be responsible for corporate
finances, regulatory and compliance matters and the overall day-to-day
management of the corporate offices. Initially, the corporate offices will be
located at the showcase installation as a matter of convenience. The entire
Management Team will be focused on the equipment fabrication and installation,
start-up, and operations of the showcase facility. At this time, an Executive
Secretary will join the management team to assist both the President & CEO and
the CFO/Business Manager. The next additions to the Management Team are VP
Technology and the VP Marketing. Reporting to the President, the VP Technology
having a background in a hydrocarbon related industry and the manufacturing of
carbon products will head up the engineering team responsible for the completion
of all system design, fabrication, installation, site development, software
development, procurement and contract management. The VP Technology will
co-ordinate the Company's engineering team of consultants and will work closely
with the CFO/Business Manager to implement accounting policies and controls
pertaining to the development and operations of the subsidiary showcase
facility. The VP Marketing will be responsible for the development and
implementation of a marketing campaign pertaining to the sale of disposal
services to the existing infrastructure within the jurisdiction. The VP
Marketing working in conjunction with VP Technology will also develop and
implement campaigns related to the sale of the Company's various byproducts. In
addition to the to the President & CEO, the corporate office staff during the
construction and installation process are as follows:
CFO/Business Manager - $100,000 VP Technology - $85,000 VP Marketing - $85,000
Executive Secretary - $40,000
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.
There are no limitations pertaining to the use of Mr. Vaisler's home office.
However, subsequent to the effective date of the registration statement, an
office construction trailer will be moved to the selected site and the corporate
office functions will be based there until such time as the showcase
installation offices are complete. Upon completion of the showcase facility's
offices, the corporate offices will be moved into the office area until such
time as the facility is fully operational.
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, no 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.
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, Principal Financial Officer, and
Principal Accounting Officer
David Williams 62 Director
Walter Martin 62 Director
30
Peter Vaisler has been the President, CEO and Director of Alliance Recovery
Corporation since inception November 2001. On February 11, 2005, he became our
principal financial officer And principal accounting officer. Since 1995, Mr.
Vaisler and a team of third party engineers and scientists have been working to
develop the ARC Unit by integrating existing manufacturing and energy components
into a single process system to thermally reduce waste rubber to a fuel oil for
use as a feedstock to generate electricity. Using knowledge gleaned from
research and development projects by several U.S. and international groups, Mr.
Vaisler and his team applied existing chemical manufacturing processes to
thermally reduce rubber to fuel oil for energy production. A by-product of the
ARC thermal reduction of rubber to fuel oil is a commercial grade of carbon
black. Mr.
Vaisler and his team also developed and implemented strategies related to site
selection, regulatory affairs, permitting and communications with a view to
refining the business concept to the point that installation of the ARC Unit
could be accomplished in various U.S. jurisdictions. Mr. Vaisler managed the
engineering team and coordinated design and fabrication activities addressing
technical refinements to the integration of "off-the-shelf" system components
that will be purchased by Alliance for the first installation.
From 1979 to 1985, Mr. Vaisler was a senior executive for Topaz Foods Limited
based in St. Thomas, Ontario, Canada. He was responsible for project management
with a Canadian food manufacturer coordinating the design, installation, and
start-up of a new manufacturing process, including conveyance and packaging
machinery innovations. As a Project Manager, Mr. Vaisler coordinated the
activities of European based engineers & fabricators, and North American
contractors in connection with the use of fractional evaporators for manufacture
of fruit and berry concentrates.
From 1986 to 1989, Mr. Vaisler worked for Corporate Planning Consultants based
in London, Ontario, Canada. He assisted in technology based industries and
health care institutions with the commercialization of technological
innovations. As part of his responsibilities, Mr. Vaisler initiated technical
and business activities pertaining to biomedical waste disposal utilizing
"state-of-the-art" incinerators. His interest in the thermal reduction of rubber
waste to fuel oil commenced during this period in his career.
In November 1989, Mr. Vaisler joined Conjoint Export Services. As Director of
International Trade Development for a Canadian and U.S. initiative, he provided
export market management services to primarily technology based manufacturers
seeking both export and import market growth. Mr. Vaisler commenced his
activities pertaining to the development of the ARC Unit in 1994. Mr. Vaisler
obtained a Bachelor of Arts degree from the University of Western Ontario in
1974.
David Williams has been our director since 2004. He has business experience in
the area of Investment Management. Mr. Williams graduated from Bishops
University in Quebec, Canada in 1963 with a Bachelor of Business Administration,
gaining his Masters in Business Administration from Queens' University in
Kingston, Ontario in 1964 and later was a recipient of a Doctor of Civil Laws
from Bishops in 1996.
David Williams has been involved in the investment management business for over
30 years with experience in corporate finance. David began his career in the
investment business as a bond and money market trader. From 1966, he acted as an
investment analyst and portfolio manager with Hodgson, Roberton, Laing and
Company, one of Canada's oldest investment counseling firms. Mr. Williams'
responsibilities included; equity and fixed income analysis and management of
personal investment portfolios. In 1966 David joined, and later became a senior
partner of, Beutel Goodman and Company, a value management company dealing in
equity and fixed income assets, with $30 million under management. Mr. Williams,
along with several partners, successfully built the company to the point where
it had $11.6 billion under management in 1993. David's responsibilities over the
years have included managing substantial institutional portfolios as well as
extensive marketing and client liaison work with many of the firms' most
important clients demonstrating a large capacity for managing large portfolios.
He ceased working for Beutel, Goodman and Company in December 1993. He has been
managing Roxborough Holdings Limited since February 1994.
Mr. Williams currently includes charitable and special interests programs in his
daily activities while remaining on the Board of Directors of such companies as:
Bennett Environmental Inc. (TSX listed) ) which specializes in thermal treatment
of contaminated soil; MetroOne Telecommunications Inc. (NASDAQ listed) which
provides major telephone companies with enhanced directory services; and ReFocus
Group Inc. (OTC BB listed) which is a medical treatment device company
specializing in vision disorders.
31
Mr. Williams' past directorships include: Drug Royalty Corporation Inc. which
specializes in medical devices and pharmaceutical products; Equisure Financial
Inc., a company involved in general and life insurance as well as financial
planning; and Duff & Phelps LLC, a NASDAQ listed company with interest in middle
market mergers and acquisitions.
Mr. Williams currently continues to manage Roxborough Holdings Ltd., a family
owned private equity holding company which is an equity investor in a variety of
private and public companies.
Walter Martin has been our director since 2004. Walter Martin brings more than
two decades of corporate finance experience to the Company. Mr. Martin began his
career with Versatile Investments before moving to Brightside Financial
Corporation. In 1983 as one of three founders of Brightside Financial Mr. Martin
helped built the Company to hold over 160 sales advisors administering over $1
Billion when it was sold to Assante Corporation. Mr. Martin continued to work
for Assante Corporation after its buyout by Brightside until its full
integration. From 1996 to the present, Mr. Martin has worked for Assante Corp.,
a financial planning firm based in Canada. He was a Vice President from
1996-2002, and a consultant from 2002 to the present. Mr. Martin currently sits
as a member on the board of three companies in the software and mutual fund
industries, as well as a charitable company serving refugees.
Our directors serve annual terms commencing January 1 of each year.
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, 2004,
2003 and 2002:
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) 2004 $ 250,000 -0- -0- -0- -0-
CEO & President 2003 $ 250,000 -0- -0- -0- -0-
2002 $ 250,000 -0- -0- -0- -0-
* Represents non-salary compensation pursuant to Mr. Vaisler's consulting
agreement with us. Please note that Mr. Vaisler has accrued, but deferred such
compensation and as noted below, his actual employment agreement will not become
effective until this registration statement is declared effective.
(1) In 2005, Mr. Vaisler will also be entitled to compensation of $250,000 per
year based on his consulting agreement with us.
Option Grants Table. The following table sets forth information concerning
individual grants of stock options to purchase our common stock made to the
executive officer named in the Summary Compensation Table during fiscal 2003 and
2004 to date.
OPTIONS GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of securities Percent of total
underlying options options granted to Exercise or base
granted employees in last price Expiration
Name (#) fiscal year ($/Share) Date
- -----------------------------------------------------------------------------------------
Peter Vaisler -0- N/A N/A N/A
32
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 2004 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.
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 June 9, 2005, 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:
33
Name and address of Beneficial Owner Amount and Nature of Percent of Total
Beneficial Ownership (3) Ownership
- ------------------------------------------------- ------------------------- -----------------------
Peter Vaisler (1) 7,750,000 41.24%
1133 St. Anthony Road
London, Ontario, Canada N6H 2P9
David Williams (2) 2,800,000 14.90%
45 St. Claire Avenue West, Suite 1202
Toronto, ON M4V 1K9
Walter Martin 240,000 1.28%
20 Sandpiper Ct.,
Elmira, ON N3B 3C5
Suzy Jafine (In Trust) (4) 1,450,000 7.72%
80 West Dr.
Brampton, ON L6T 3T6
Saul Brothers Partnership (5) 1,450,000 7.72%
2802 Sundown Ln., No. 210
Boulder, CO 80303
Duffy Herman & Tricia Morris 1,450,000 7.72%
1001 Kupulau Drive
Khei, HI 96753
Executive Officers and 10,790,000 57.42%
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.
(3) None of the shareholders listed above has any rights to options, warrants,
rights, conversion privileges or any other similar obligations. (4) The
shares held by Suzy Jafine are not in a voting trust. (5) Saul Brothers
Partnership is beneficially owned equally by Ron Saul, Richard Saul,
Lawrence Saul and David Saul.
SELLING STOCKHOLDERS
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:
34
- - 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.
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 all 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 1.60% 300,000 0 0
Liliana LaCavera 35,100 .19% 35,100 0 0
Filomena Meffe 163,100 .87% 163,100 0 0
1064055 Ontario Inc. c/o 220,500 1.20% 220,500 0 0
William J. Daniel (5)
Suzy Jafine (in trust) 1,450,000 7.72% 200,000 1,250,000 5.77%
Saul Brothers Partnership (6) 1,450,000 7.72% 200,000 1,250,000 5.77%
Duffy Herman & Tricia Morris 1,450,000 7.72% 200,000 1,250,000 5.77%
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 .53% 100,000 0 0
Robert Lisser 360,000 1.92% 360,000 0 0
Roxborough Holdings Limited 2,800,000 14.90% 400,000 2,600,000 12.31%
(4)
TOTAL 8,447,800 2,297,800
35
(1) Dora Vaisler is Peter Vaisler's mother.
(2) Based on 18,792,156 shares issued and outstanding as of June 9, 2005.
(3) Based on 21,668,658 shares issued and outstanding as of June 9, 2005
assuming the exercise of the 2,876,502 warrants outstanding.
(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.
(5) William J. Daniel is the beneficial owner of 1064055 Ontario, Inc.
(6) Saul Brothers Partnership is beneficially owned by Ron Saul, Richard
Saul, Lawrence Saul and David Saul.
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.(3) 200,000 1.06% 400,000 0 0
Brawley Cathers Limited (4) 100,000 .53% 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.(11) 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
36
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) 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
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. (6) 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 .53% 200,000 0 0
Corp. (13)
Donna Grills 40,000 .21% 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 .64% 240,000 0 0
Geary Naraine 120,000 .64% 240,000 0 0
Cridon Investments Limited(12) 40,000 .21% 80,000 0 0
37
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 .21% 80,000 0 0
Brian Carr 45,000 .24% 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 .21% 80,000 0 0
Robert John Shea, in trust 10,000 .05% 20,000 0 0
for Matthew and Victoria Shea
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 .74% 280,000 0 0
Elle Lee Inc. (8) 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
38
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 (10)
Ronald A. Hillman 31,000 .16% 62,000 0 0
Robert W. Hillman 31,000 .16% 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. (9) 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
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)(7) -0- 0 765,146 0 0
Total -0- 765,146
39
(1) 1451624 Ontario Inc. owns -0- shares and 765,146 warrants convertible into
765,146 shares of our common stock. All of the shares underlying the
warrants are being registered.
(2) Based on 18,792,156 shares issued and outstanding as of June 9, 2005. (3)
Mirador Consulting Inc. is beneficially owned by Brian S. John and Richard
Miller. Mirador Consulting Inc. has 200,000 warrants which are exercisable
at the following prices: 100,000 at $5.00 per share and 100,000 at $7.50
per share.
(4) Brawley Cathers Limitedis beneficially owned by the following: Peter
Aitken, Tom Bradbury, Murray Galloway, Cam Laidlaw, Jane Laidlaw, David
Macdonald, Robin Matheson, David Stovel, Roger Warren, Karen Weir and
Daniel C. Hardie.
(5) 874297 Ontario Ltd. is beneficially owned by Catherine Somerville.
(6) 823294 Ontario Inc. is beneficially owned by The Payne Family Trust.
(7) 1451624 Ontario Inc. is beneficially owned by David Goodband and The Payne
Family Trust.
(8) Elle Lee Inc. is beneficially owned by Michelle Hrga.
(9) Envo Tech Inc. is beneficially owned by George Friesen and Norman-Lee
Pulliam.
(10) 1571469 Ontario Inc. is beneficially owned by James F. Wilson.
(11) Ruby Chicks Investment Inc. is beneficially owned by the following: Kelly
Smith, Arlene Woolcox, Susan Feagan, Emily Cieslinski, Marj Smith, Lori
Lamarche-Bowman, Margaret Hammell, Diane Elms, Sandra Goodhand and Pat
Duguid.
(12) Cridon Investments Limited is beneficially owned by Donald V. Crich.
(13) Eagle Vision Securities Corp. is beneficially owned by Kyle Wolfe.
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.
One of our selling security holders, Brawley Cathers Limited is a broker-dealer
and an "underwriter" with the meaning of the Securities Act of 1933 with respect
to the shares that it is offering for resale.
The selling stockholders will sell their common stock at the price of $.50 per
share until our shares of common stock are quoted on the OTC Bulletin Board (or
any other recognized exchange). Thereafter, the selling stockholders may sell
their shares at prevailing market prices or privately negotiated prices.
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.
40
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 our directors and officers who sign the registration
statement against certain liabilities, including liabilities arising under the
Act.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have 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.
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.
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 June 9, 2005, we had 18,792,156, 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.
41
Preferred Stock
We have no preferred stock authorized.
Warrants
As of June 9, 2005, we have 2,876,502 warrants outstanding. Each warrant
entitles the warrant holder to one share of our common stock. The exercise price
for 2,676,502 warrants is $1.00 per share. Mirador Consulting Inc. has 200,000
warrants which are exercisable at the following prices: 100,000 at $5.00 per
share and 100,000 at $7.50 per share. We will receive proceeds from the exercise
of the warrants.
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, 2004, 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 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.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission in Washington, DC, a
registration statement on Form SB-2 under the Securities Act of 1933 with
respect to the shares we are offering. Prior to the effective date of the
registration statement we were not subject to the information requirements of
the Securities Exchange Act of 1934. This prospectus does not contain all of the
information set forth in the registration statement, as permitted by the rules
and regulations of the SEC. Reference is hereby made to the registration
statement and exhibits thereto for further information with respect to Source
Atlantic, Inc. and the shares to which this prospectus relates. Copies of the
registration statement and other information filed by Spurce Atlantic, Inc. with
the SEC can be inspected and copied at the public reference facilities
maintained by the SEC in Washington, DC at 450 Fifth Street, NW, Washington, DC
20549. In addition, the SEC maintains a World Wide Website that contains
reports, proxy statements and other information regarding registrants such as
Source Atlantic, Inc. that file electronically with the SEC at the following
Internet address: (http:www.sec.gov).
42
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(UNAUDITED)
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 CONDENSED BALANCE SHEET AS OF MARCH 31, 2005 (UNAUDITED)
PAGE 2 CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 2005 AND 2004 AND FOR THE PERIOD FROM
NOVEMBER 6, 2001 (INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
PAGES 3 CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO MARCH
31, 2005 (UNAUDITED)
PAGE 4 CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 2005 AND 2004 AND FOR THE PERIOD FROM
NOVEMBER 6, 2001 (INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
PAGES 5 - 10 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEET
AS OF MARCH 31, 2005
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 26,257
Property and Equipment, Net 8,653
-----------------
TOTAL ASSETS $ 34,910
- ------------ =================
LIABILTIES AND STOCKHOLDERS' DEFICIECNY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 329,802
-----------------
TOTAL CURRENT LIABILITIES 329,802
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' DEFICIENCY
Common stock, $0.01 par value, 100,000,000 shares authorized,
18,672,156 shares issued and outstanding 186,721
Additional paid in capital 1,321,121
Subscriptions receivable (50,260)
Deferred stock compensation (118,512)
Accumulated deficit during development stage (1,633,962)
-----------------
Total Stockholders' Deficiency (294,892)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 34,910
- ---------------------------------------------- =================
1
See accompanying notes to condensed financial statements.
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Period From
For the Three For the Three November 6, 2001
Months Ended Months Ended (Inception) to
March 31, 2005 March 31, 2004 March 31, 2005
------------------------------------------------------------------------
OPERATING EXPENSES
Consulting fees $ 97,848 $ 83,333 $ 1,320,278
Professional fees 32,463 8,000 202,171
General and administrative 9,630 21,167 111,513
--------------------- -------------------- ---------------------
TOTAL OPERATING EXPENSES 139,941 112,500 1,633,962
--------------------- -------------------- ---------------------
NET LOSS $ (139,941) $ (112,500) $ (1,633,962)
===================== ==================== =====================
Net loss per share - basic and diluted $ (0.01) (0.01) $ (0.09)
===================== ==================== =====================
Weighted average number of shares outstanding
during the period - basic and diluted 18,600,456 18,117,378 17,296,837
===================== ==================== =====================
2
See accompanying notes to condensed financial statements.
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO MARCH 31, 2005
(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 --
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 with warrants issued for cash ($0.50 per share) 180,000 1,800 88,200 --
Common stock with options issued for services ($0.50 per share) 200,000 2,000 98,000 --
Issuance of warrants for services -- -- -- --
Collection of subscription receivable -- -- -- 159,782
Net loss, 2004 -- -- -- --
---------- ----------- ----------- -----------
Balance, December 31, 2004 18,309,156 183,091 1,111,751 (49,960)
Common stock with options issued for services ($0.50 per share) 300,000 3,000 147,000 (300)
Amortization of deferred compensation -- -- -- --
Sale of common stock ($1.00 per share) 63,000 630 62,370 --
Net loss for the three months ended March 31, 2005 -- -- -- --
---------- ----------- ----------- -----------
BALANCE, MARCH 31, 2005 18,672,156 $ 186,721 $ 1,321,121 $ (50,260)
========== =========== =========== ===========
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 with warrants issued for cash ($0.50 per share) -- -- 90,000
Common stock with options issued for services ($0.50 per share) (4,158) -- 95,842
Issuance of warrants for services -- -- --
Collection of subscription receivable -- -- 159,782
Net loss, 2004 -- (489,255) (489,255)
------------- ------------ -----------
Balance, December 31, 2004 (4,158) (1,494,021) (253,297)
Common stock with options issued for services ($0.50 per share) (149,700) -- --
Amortization of deferred compensation 35,346 -- 35,346
Sale of common stock ($1.00 per share) -- -- 63,000
Net loss for the three months ended March 31, 2005 -- (139,941) (139,941)
------------- ------------ -----------
BALANCE, MARCH 31, 2005 $ (118,512) $ (1,633,962) $ (294,892)
============= ============ ===========
3
See accompanying notes to condensed financial statements.
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Period From
For the Three For the Three November 6, 2001
Months Ended Months Ended (Inception) to
March 31, 2005 March 31, 2004 March 31, 2005
-------------------- --------------------- -----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (139,941) $ (112,500) $ (1,633,962)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock issued for services 35,346 18,833 321,643
Depreciation expense 558 - 2,513
Changes in operating assets and liabilities:
Accounts payable and accrued expenses (14,727) 9,038 329,802
-------------------- --------------------- --------------------
Net Cash Used In Operating Activities (118,764) (84,629) (980,004)
-------------------- --------------------- --------------------
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:
Proceeds from issuance of common stock 63,000 17,000 1,017,427
-------------------- --------------------- --------------------
Net Cash Provided By Financing Activities 63,000 17,000 1,017,427
-------------------- --------------------- --------------------
NET INCREASE (DECREASE) IN CASH (55,764) (78,795) 26,257
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,021 192,737 -
-------------------- --------------------- --------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26,257 $ 113,942 $ 26,257
==================== ===================== ====================
4
See accompanying notes to condensed financial statements.
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(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 March 31, 2005
and 2004, common share equivalents were anti-dilutive and not used in the
calculation of diluted net loss per share.
(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.
5
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(UNAUDITED)
(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) 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 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).
During the year ended December 31, 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).
6
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(UNAUDITED)
During the year ended December 31, 2004, the Company collected $159,782
of subscriptions receivable.
During March 2005, the Company sold a total of 63,000 shares of common
stock to four individuals for cash of $63,000 ($1.00 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 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).
During July 2002, the Company entered into an agreement with a consultant
to provide services for a period of one year. The agreement called for
compensation of 100,000 units, each unit consists of one share of common
stock and one common stock warrant exercisable at $1.00 per share for a
period of two years. The units had a fair value of $50,000 based on
recent cash offerings ($0.50 per share). The Company recorded $22,917 and
$27,083 of consulting expense for the years ended December 31, 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
for cash of $200, 200,000 shares of common stock warrants to purchase
100,000 shares of common stock at an exercise price of $5.00 for a period
of three years, and an option to purchase 100,000 shares of common stock
at an exercise price of $7.50 for a period of three years. The common
stock has a fair value of $100,000 based on recent cash offerings and
will be amortized over the life of the agreement ($0.50 per share). For
the three months ended March 31, 2005, the Company has recognized
consulting expense of $4,158 under the agreement.
7
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(UNAUDITED)
In January 2005, the Company entered into a consulting agreement with
a consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of
one year and the consultant to receive compensation of $2,000 per
month. In addition the Company sold the consultant 300,000 shares of
common stock for cash proceeds of $300 and recorded the fair value of
the common stock of $149,700. The fair value of the common stock will
be recognized over the term of the agreement. For the three months
ended March 31, 2005, the Company has recognized consulting expense of
$31,188 under the agreement.
(D) Common Stock Warrants
-------------------------
The Company issued 765,146 warrants during 2004, at an exercise price of
$1.00 per share to a consultant for services. The fair 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 2,876,502 warrants outstanding
at March 31, 2005. The Company has reserved 2,876,502 shares of common
stock for the future exercise of the warrants at March 31, 2005.
(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) 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 5(D)). The Company has accrued
$308,162 and $300,143 under the agreement to the consultant at March 31,
2005 and 2004, respectively.
8
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(UNAUDITED)
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). The agreement was fully expensed as of
December 31, 2003.
During January 2004, the Company entered into a consulting agreement with
a consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of
one year and the consultant to receive: 200,000 shares of common stock,
monthly retainers of $4,000, warrants to purchase 100,000 shares of
common stock at an exercise price of $5.00 for a period of three years,
and an option to purchase 100,000 shares of common stock at an exercise
price of $7.50 for a period of three years. The common stock has a fair
value of $100,000 based on recent cash offerings and will be amortized
over the life of the agreement ($0.50 per share) (See Note 6(A)).
In January 2005, the Company entered into a consulting agreement with a
consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of
one year and the consultant to receive compensation of $2,000 per month.
In addition the Company sold the consultant 300,000 shares of common
stock for cash proceeds of $300 and recorded the fair value of the common
stock of $149,700. The fair value of the common stock will be recognized
over the term of the agreement.
9
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
(UNAUDITED)
(B) License Agreement
---------------------
Upon effectiveness of the employment agreement with our Chief Executive
Officer and President, the Company will be entitled to use certain
technology and know-how that is owned by our Chief Executive Officer and
President royalty free until the end of the employment agreement. Upon
termination of the employment agreement with the Chief Executive Officer
and President, the Company has the right to license the technology for a
one time fee. The license fee will be negotiated by the Company and the
Chief Executive Officer and will equal the replacement value of such
technology and will be determined with reference to the engineer's
opinion dated March 6, 2002, a copy of which is attached to the
employment agreement (See Note 5(A)).
(C) Employment Agreement
------------------------
During 2004, the Company entered into an employment agreement with a
consultant to assume the position of Chief Executive Officer and
President for a term of five years at an annual minimum salary of
$250,000 with additional bonuses and fringe benefits. The agreement is to
become effective upon the approval by the Securities and Exchange
Commission on the SB-2 Registration Statement (See Note 5(A) and (B)).
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
$294,892 and used cash in operations from inception of $980,004. 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 EVENT
- -----------------------
During 2005, the Company issued 120,000 shares of common stock and
received cash proceeds of $120,000 ($1.00 per share).
10
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 AND 2003
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, 2004 AND 2003
PAGE 3 STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER
31,
2004 AND 2003 AND FOR THE PERIOD FROM NOVEMBER 6, 2001
(INCEPTION) TO DECEMBER 31, 2004
PAGES 4 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR
THE
PERIOD FROM NOVEMBER 6, 2001 (INCEPTION) TO DECEMBER
31,
2004
PAGE 5 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER
31,
2004 AND 2003 AND FOR THE PERIOD FROM NOVEMBER 6, 2001
(INCEPTION) TO DECEMBER 31, 2004
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, 2004 and 2003, 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,
2004. 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, 2004 and 2003 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, 2004 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 6 to the
financial statements, the Company is in the development stage with no
operations, a stockholders' deficiency of $253,297, a working capital deficiency
of $262,508 and used cash in operations from inception of $861,240. This raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning this matter are also described in Note 6. 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
April 6, 2005
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2003
ASSETS
------
2004 2003
------------------- -----------------
CURRENT ASSETS
Cash $ 82,021 $ 192,737
Property and Equipment, net 9,211 -
------------------- -----------------
TOTAL ASSETS $ 91,232 $ 192,737
- ------------ =================== =================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 344,529 $ 302,403
------------------- -----------------
TOTAL CURRENT LIABILITIES 344,529 302,403
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' DEFICIENCY
Common stock, $0.01 par value, 100,000,000 shares authorized,
18,309,156 and 17,929,156 shares issued and outstanding,
respectively
Additional paid in capital 1,111,751 925,551
Subscriptions receivable (49,960) (209,742)
Deferred stock compensation (4,158) -
Accumulated deficit during development stage (1,494,021) (1,004,766)
------------------- -----------------
Total Stockholders' Deficiency (253,297) (109,666)
------------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 91,232 $ 192,737
- ---------------------------------------------- =================== =================
See accompanying notes to financial statements.
2
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
The Period From
November 6, 2001
For The Year Ended For The,Year Ended (Inception) to
December 31, 2004 December 31, 2003 December 31, 2004
-------------------- -------------------- ---------------------
OPERATING EXPENSES
Consulting fees $ 377,642 $ 358,750 $ 1,222,430
Professional fees 55,728 18,115 169,708
General and administrative 55,885 40,757 101,883
-------------------- -------------------- ---------------------
TOTAL EXPENSES 489,255 417,622 1,494,021
-------------------- -------------------- ---------------------
NET LOSS $ (489,255) $ (417,622) $ (1,494,021)
==================== ==================== =====================
Net loss per share - basic and diluted $ (0.03) (0.02) $ (0.09)
==================== ==================== =====================
Weighted average number of shares outstanding
during the period - basic and diluted 18,028,234 17,169,843 17,194,814
==================== ==================== =====================
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, 2004
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)
- -------------------------- ========== ========== ========== ==========
Common stock with warrants issued for cash
($0.50 per share) 180,000 1,800 88,200 --
Common stock with options issued for services
($0.50 per share) 200,000 2,000 98,000 --
Issuance of warrants for services -- -- -- --
Collection of subscription receivable -- -- -- 159,782
Net loss, 2004 -- -- -- --
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 2004 18,309,156 $ 183,091 $1,111,751 $ (49,960)
- -------------------------- ========== ========== ========== ==========
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 with warrants issued for cash
($0.50 per share) -- -- 90,000
Common stock with options issued for services
($0.50 per share) (4,158) -- 95,842
Issuance of warrants for services -- -- --
Collection of subscription receivable -- -- 159,782
Net loss, 2004 -- (489,255) (489,255)
---------- ---------- ----------
BALANCE, DECEMBER 31, 2004 $ (4,158) $(1,494,021) (253,297)
- -------------------------- ========== ========== ==========
See accompanying notes to financial statements.
4
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
The Period From
November 6, 2001
For The Year Ended For The,Year Ended (Inception) to
December 31, 2004 December 31, 2003 December 31, 2004
-------------------- -------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (489,255) $ (417,622) $ (1,494,021)
Adjustments to reconcile net loss to net cash used
in operating activities:
Stock issued for services 95,842 43,750 286,297
Depreciation expense 1,955 - 1,955
Changes in operating assets and liabilities:
Accounts payable and accrued expenses 42,126 75,570 344,529
--------------------- -------------------- ------------------
Net Cash Used In Operating Activities (349,332) (298,302) (861,240)
--------------------- -------------------- ------------------
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 249,782 500,355 954,427
--------------------- -------------------- ------------------
Net Cash Provided By Financing Activities 249,782 491,039 954,427
--------------------- -------------------- ------------------
NET INCREASE (DECREASE) IN CASH (110,716) 192,737 82,021
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 192,737 - -
--------------------- -------------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 82,021 $ 192,737 $ 82,021
===================== ==================== ==================
See accompanying notes to financial statements.
5
ALLIANCE RECOVERY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2004 AND 2003
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, 2004, the Company did not have any
balances that exceeded FDIC insurance limits.
(D) Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line
method over the estimated useful life of five years.
(E) Income Taxes
The Company accounts for income taxes under the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date. As of December 31, 2004 and 2003, the
Company has a net operating loss carryforward of approximately
$1,494,000 and $1,004,700, respectively, available to offset future
taxable income through 2024. The valuation allowance at December 31,
2004 and 2003 was $507,967 and $351,645, respectively. The net change
in the valuation allowance for the year ended December 31, 2004 was an
increase of $156,322.
(F) 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.
(G) Loss Per Share
Basic and diluted net loss per common share is computed based upon the
weighted average common shares outstanding as defined by Financial
Accounting Standards No. 128, "Earnings Per Share." As of December 31,
2004 and 2003, common share equivalents were anti-dilutive and not
used in the calculation of diluted net loss per share.
(H) Business Segments
The Company operates in one segment and therefore segment information
is not presented.
(I) Long-Lived Assets
The Company accounts for long-lived assets under the Statements of
Financial Accounting Standards Nos. 142 and 144 "Accounting for
Goodwill and Other Intangible Assets" and "Accounting for Impairment
or Disposal of Long-Lived Assets" ("SFAS No. 142 and 144"). In
accordance with SFAS No. 142 and 144, long-lived assets, goodwill and
certain identifiable intangible assets held and used by the Company
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of
long-lived assets, goodwill and intangible assets, the recoverability
test is performed using undiscounted net cash flows related to the
long-lived assets. (J) Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 151,
"Inventory Costs - an amendment of ARB No. 43, Chapter 4"" SFAS No.
152, "Accounting for Real Estate Time-Sharing Transactions - an
amendment of FASB Statements No. 66 and 67," SFAS No. 153, "Exchanges
of Non-monetary Assets - an amendment of APB Opinion No. 29," and SFAS
No. 123 (revised 2004), "Share-Based Payment," were recently issued.
SFAS No. 151, 152, 153 and 123 (revised 2004) have no current
applicability to the Company and have no effect on the financial
statements.
NOTE 2 PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2004 and 2003 were as follows:
2004 2003
------------------ -----------------
Computer $ 11,166 $ -
Less accumulated depreciation 1,955 -
------------------ -----------------
$ 9,211 $ -
================== =================
During the year ended December 31, 2004 and 2003 and the period from
November 6, 2001 to December 31, 2004, the Company recorded
depreciation expense of $1,955, $0 and $1,955, respectively.
NOTE 3 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 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).
During the year ended December 31, 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 year ended December 31, 2004, the Company collected
$159,782 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 cash offerings ($0.50 per share). The
Company recorded $22,917 and $27,083 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 warrants to purchase 100,000 shares of common stock at an
exercise price of $5.00 for a period of three years, and an option to
purchase 100,000 shares of common stock at an exercise price of $7.50
for a period of three years. The common stock has a fair value of
$100,000 based on recent cash offerings and will be amortized over the
life of the agreement ($0.50 per share). For the year ended December
31, 2004, the Company has recognized consulting expense of $95,842
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 1,731,356
warrants outstanding at December 31, 2004 and 2003, respectively. The
Company has reserved 2,493,929 shares of common stock for the future
exercise of the warrants at December 31, 2004.
(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 4 RELATED PARTY TRANSACTIONS
See Notes 3 and 5.
NOTE 5 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 5(D)). The Company has
accrued $308,162 and $300,143 under the agreement to the consultant at
December 31, 2004 and 2003, 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). The agreement was
fully expensed as of December 31, 2003.
During January 2004, the Company entered into a consulting agreement
with a consultant to provide management and public relations services.
The agreement calls for the consultant to provide services for a
period of one year and the consultant to receive: 200,000 shares of
common stock, monthly retainers of $4,000, warrants to purchase
100,000 shares of common stock at an exercise price of $5.00 for a
period of three years, and an option to purchase 100,000 shares of
common stock at an exercise price of $7.50 for a period of three
years. The common stock has a fair value of $100,000 based on recent
cash offerings and will be amortized over the life of the agreement
($0.50 per share) (See Note 6(A)).
(B) License Agreement
Upon effectiveness of the employment agreement with our Chief
Executive Officer and President, the Company will be entitled to use
certain technology and know-how that is owned by our Chief Executive
Officer and President royalty free until the end of the employment
agreement. Upon termination of the employment agreement with the Chief
Executive Officer and President, the Company has the right to license
the technology for a one time fee. The license fee will be negotiated
by the Company and the Chief Executive Officer and will equal the
replacement value of such technology and will be determined with
reference to the engineer's opinion dated March 6, 2002, a copy of
which is attached to the employment agreement (See Note 5(A)).
(C) Employment Agreement
During 2004, the Company entered into an employment agreement with a
consultant to assume the position of Chief Executive Officer and
President for a term of five years at an annual minimum salary of
$250,000 with additional bonuses and fringe benefits. The agreement is
to become effective upon the approval by the Securities and Exchange
Commission on the SB-2 Registration Statement (See Note 5(A) and (B)).
NOTE 6 GOING CONCERN
As reflected in the accompanying financial statements, the Company is
in the development stage with no operations, a stockholders'
deficiency of $253,297, a working capital deficiency of $262,508 and
used cash in operations from inception of $861,240. 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 7 SUBSEQUENT EVENTS
(A) Consulting Agreement
In January 2005, the Company entered into a consulting agreement with
a consultant to provide management and public relations services. The
agreement calls for the consultant to provide services for a period of
one year and the consultant to receive compensation of $2,000 per
month. In addition the Company sold the consultant 300,000 shares of
common stock for cash proceeds of $300 and recorded the fair value of
the common stock of $149,700. The fair value of the common stock will
be recognized over the term of the agreement.
(B) Stock Issued for Cash
In March 2005, the Company sold a total of 63,000 units consisting of
one share of common stock and one warrant exercisable for a period of
one year after an effective Registration Statement is approved at an
exercise price of $1.00 ($1.00 per share) to four individuals for cash
of $63,000.
ALLIANCE RECOVERY CORPORATION
6,805,658 SHARES OF COMMON STOCK
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
UNTIL _____________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
43
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. 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.
In addition, Article X of our bylaws states that every one of our directors,
officers, employees, and agents shall be indemnified by us to the fullest extent
permitted by law.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth all 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 $ 535.87
Legal fees and expenses (1) $50,000
Accounting fees and expenses (1) $25,000
Miscellaneous and Printing fees(1) $ 5,000
Total (1) $80,535.87
(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
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.
44
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
45
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. Mirador Consulting, Inc. did not locate any of the purchasers listed
on the table below. Mr. Vaisler, our officer and director, through his personal
and business contacts, located all the purchasers set forth below:
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
46
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.
47
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
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.
In March 2005, we issued 63,000 shares of our restricted common stock to the
following parties for cash consideration of $1.00 per share: Robert Shea -
10,000 shares; John Knecht - 25,000 shares; Brian Carr - 20,000 shares; Glen
Coppleston - 8,000 shares. Messrs. Shea and Carr are our present shareholders;
Mr. Knecht is the father-in-law of Mr. Vaisler, our officer and director; and
Mr. Coppleston is a personal friend of Mr. Vaisler. The issuances were valued at
$1.00 per share or $63,000 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.
48
On April 22, 2005, we issued 15,000 shares of our restricted common stock to the
following parties for cash consideration of $1.00 per share: Jacqueline Lewis -
5,000 shares; Michael Miletich - 5,000 shares and Michael Eagen - 5,000 shares.
Messrs. Eagen and Miletich have been close friends of Peter Vaisler for numerous
years, and Ms. Lewis is related to Mr. Miletich. The issuances were valued at
$1.00 per share or $15,000 in the aggregate. On May 4, 2005, we issued 105,000
shares of our restricted common stock to the following parties for cash
consideration of $1.00 per share: Lewis J. Martin - 55,000 shares and Rod
Robinson-50,000 shares. Messrs. Martin and Robinson are our present
shareholders. The issuances were valued at $1.00 per share or $105,000 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.
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 2004 Mirador Consulting, Inc., Consulting Agreement *
10.4 2005 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)
* Filed with the original Form SB-2 on December 27, 2004 (SEC File # 333-121659)
* Filed with Amendment No. 2 to Form SB-2 On April 21, 2005( SEC File
#333-121659)
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.
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(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, (1)for purposes of
determining any liability under the Securities Act of 1933, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declares it effective ; (2) for purposes od determining liability
under the Securities Act, treat each post-effective amendment that contains a
form of prospectus as a new registration statement for the securities offered in
the registration statement, and that offering of the securities at that time as
the initial bona fide offering of those securities. .
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized 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 14th day of June,
2005.
ALLIANCE RECOVERY CORPORATION
By: S/S PETER VAISLER
- ----------------------------------
PETER VAISLER
Chairman of the Board of Directors,
President, Chief Executive Officer,
Principal Financial Officer and
Principal Accounting 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 June 9, 2005
PETER VAISLER Chief Executive Officer, President
Principal Financial Officer and
Principal Accounting Officer
/S/ DAVID WILLIAMS Director June 14, 2005
DAVID WILLIAMS
/S/ WALTER MARTIN Director June 14, 2005
WALTER MARTIN
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