UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to______.

ALLIANCE RECOVERY CORPORATION

(Exact name of registrant as specified in Charter

DELAWARE		333-121659		30-0077338
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

1000 N.W., ST, SUITE 1200, WILMINGTON, DE 19801

(Address of Principal Executive Offices)

_______________

302-651-0177

(Issuer Telephone number)

_______________

(Former Name or Former Address if Changed Since Last Report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of as of May 16, 2008: 20,792,092 shares of Common Stock.

ALLIANCE RECOVERY CORPORATION

FORM 10-Q

March 31, 2008

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition
Item 3	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Control and Procedures

PART II-- OTHER INFORMATION

Item 1	Legal Proceedings
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K

SIGNATURE

Item 1. Financial Information

ALLIANCE RECOVERY CORPORATION

(a development stage company)

FINANCIAL STATEMENTS

AS OF MARCH 31, 2008

ALLIANCE RECOVERY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

ASSETS


	March 31,			Decemner 31,
	2008			2007
CURRENT ASSETS	(Unaudited)			(Audited)
Cash	$	96		$	27,541
Prepaid expenses		5,420			-
Total Current Assets		5,516			27,541

Property and Equipment, net		1,953			2,512

TOTAL ASSETS	$	7,469		$	30,053

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

CURRENT LIABILITIES
Accounts payable	$	62,872		$	54,316
Accrued interest		38,609			30,834
Due to related party		411,223			427,493
Notes payable - net of discount of $0		-			25,000
Notes payable - related party		200,000			200,000

TOTAL CURRENT LIABILITIES		712,704			737,643

Notes payable - related party, net of discount of $17,015 and $19,622, respectively		122,985			120,378
Note payable - convertible , net of discount of $4,556 and $5,468, respectively		95,445			94,533

TOTAL LONG TERM LIABILITIES		218,430			214,911

TOTAL LIABILITIES		931,134			952,554

COMMITMENTS AND CONTINGENCIES		-			-

Common Stock Subject to Rescission Offer, $.01 par value,
1,986,646 shares issued and outstanding		1,084,823			1,084,823

STOCKHOLDERS’ DEFICIENCY
Common stock, $0.01 par value, 100,000,000 shares authorized, 18,619,446 and 18,103,779 shares issued and outstanding, respectively		186,195			181,038
Additional paid in capital		1,043,212			929,517
Subscriptions receivable		(6,600	)		(6,600	)
Deferred compensation		(8,400	)		(53,902	)
Accumulated deficit during development stage		(3,222,895	)		(3,057,377	)
Total Stockholders’ Deficiency		(2,008,488	)		(2,007,324	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	7,469		$	30,053

See accompanying notes to unaudited financial statements.

F-1

ALLIANCE RECOVERY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended March 31,						For The Period From November 6, 2001 (Inception)
							to March 31,
	2008			2007			2008
OPERATING EXPENSES
Consulting fees	$	-		$	14,028		$	526,868
Consulting fees - related party		62,500			62,500			1,583,333
Professional fees		21,129			21,137			390,835
Investor relations		53,475			-			314,629
General and administrative		17,121			8,432			349,744

TOTAL OPERATING EXPENSES		154,225			106,097			3,165,409

OTHER EXPENSES
Interest Expense		11,293			4,151			57,486

NET LOSS BEFORE PROVISION FOR
INCOME TAXES		(165,518	)		(110,248	)		(3,222,895	)

PROVISION FOR INCOME TAXES		-			-			-

NET LOSS	$	(165,518	)	$	(110,248	)	$	(3,222,895	)

Net loss per share - Basic and Diluted	$	(0.01	)	$	(0.01	)

Weighted average number of shares outstanding during the period - Basic and Diluted		18,378,873			16,914,512

See accompanying notes to unaudited financial statements.

F-2

ALLIANCE RECOVERY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION)

TO MARCH 31, 2008

(UNAUDITED)

	Common Stock				Additional Paid-In		Subscription			Deferred Stock			Accumulated Deficit During Development
	Shares		Amount		Capital		Receivable			Compensation			Stage			Total

Common stock issued to founders for services ($0.01 per share)		8,410,000	$	84,100	$	-	$	-		$	-		$	-		$	84,100

Common stock issued for cash ($0.0137 per share)		7,687,800		76,878		28,186		(105,064	)		-			-			-

Net loss for the period from November 6, 2001 (inception) to December 31, 2001		-		-		-		-			-			(104,933	)		(104,933	)

Balance, December 31, 2001 (Restated)		16,097,800		160,978		28,186		(105,064	)		-			(104,933	)		(20,833	)

Common stock with warrants issued for services ($0.50 per share)		112,710		1,127		55,228		-			(27,083	)		-			29,272

Common stock issued for services ($0.50 per share)		100,000		1,000		49,000		-			(16,667	)		-			33,333

Collection of subscriptions receivable		-		-		-		56,290			-			-			56,290

Net loss, 2002		-		-		-		-			-			(482,211	)		(482,211	)

Balance, December 31, 2002 (Restated)		16,310,510		163,105		132,414		(48,774	)		(43,750	)		(587,144	)		(384,149	)

Amortization of deferred compensation		-		-		-		-			43,750			-			43,750

Net loss, 2003		-		-		-		-			-			(417,622	)		(417,622	)

BALANCE, DECEMBER 31, 2003 (Restated)		16,310,510		163,105		132,414		(48,774	)		-			(1,004,766	)		(758,021	)

Common stock with options issued for services ($0.50 per share)		200,000		2,000		98,000		-			(4,158	)		-			95,842

Issuance of warrants for services		-		-		-		-			-			-			-

Net loss, 2004		-		-		-		-			-			(489,255	)		(489,255	)

BALANCE, DECEMBER 31, 2004 (Restated)		16,510,510		165,105		230,414		(48,774	)		(4,158	)		(1,494,021	)		(1,151,434	)

Common stock with options issued for services ($0.50 per share)		300,000		3,000		147,000		(300	)		(149,700	)		-			-

Amortization of deferred compensation		-		-		-		-			147,621			-			147,621

Collection of subscription receivable		-		-		-		42,774			-			-			42,774

Net loss, 2005		-		-		-		-			-			(545,477	)		(545,477	)

BALANCE, December 31, 2005		16,810,510		168,105		377,414		(6,300	)		(6,237	)		(2,039,498	)		(1,506,516	)

Amortization of deferred compensation		-		-		-		-			6,237			-			6,237

Conversion of notes payable to common stock		136,669		1,367		215,933		-			-			-			217,300

Net Loss, 2006		-		-		-		-			-			(360,016	)		(360,016	)

BALANCE, December 31, 2006		16,947,179		169,472		593,347		(6,300	)		-			(2,399,514	)		(1,642,995	)

Common stock issued for services ($0.51 per share)		300,000		3,000		150,000		(300	)		(152,700	)		-			-

Common stock issued for consulting services ($.30 per share)		278,000		2,780		80,620		-			(83,400	)		-			-

Common stock issued for consulting services ($.15 per share)		240,000		2,400		33,600		-			(36,000	)					-

Common stock issued for cash		338,600		3,386		43,802											47,188

Amortization of deferred compensation		-		-		-		-			218,198			-			218,198

Warrants issued for convertible debt		-		-		28,148		-			-			-			28,148

Net Loss, December 31, 2007		-		-		-		-			-			(657,863	)		(657,863	)

BALANCE, December 31, 2007		18,103,779		181,038		929,517		(6,600	)		(53,902	)		(3,057,377	)		(2,007,324	)

Amortization of deferred compensation		-		-		-		-			45,502			-			45,502

Conversion of notes payable to common stock		16,667		167		24,833		-			-			-			25,000

Common stock issued for cash		499,000		4,990		88,862		-			-			-			93,852

Net Loss, For the three months ended March 31, 2008		-		-		-		-			-			(165,518	)		(165,518	)

		18,619,446	$	186,195	$	1,043,212	$	(6,600	)	$	(8,400	)	$	(3,222,895	)	$	(2,008,488	)

See accompanying notes to unaudited financial statements

F-3

ALLIANCE RECOVERY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended March 31,						For The Period From November 6, 2001 (Inception) To
							March 31,
	2008			2007			2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(165,518	)	$	(110,248	)	$	(3,222,895	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services		45,502			10,673			703,855
Depreciation expense		559			558			9,213
Amortization		3,519			370			20,577
Changes in operating assets and liabilities:
Prepaid expenses		(5,420	)		(500	)		(5,420	)
(Decrease) / Increase in Due to related party		(16,270	)		28,846			411,223
Accounts payable and accrued expenses		16,331			266			112,281
Net Cash Used In Operating Activities		(121,297	)		(70,035	)		(1,971,166	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		-			-			(11,166	)
Net Cash Used In Investing Activities		-			-			(11,166	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt		-			-			263,500
Proceeds from issuance of debt - related party		-			50,000			294,000
Proceeds from issuance of convertible debt		-			-			100,001
Proceeds from issuance of common stock subject to rescission		-			-			1,084,823
Proceeds from issuance of common stock		93,852			-			240,104
Net Cash Provided By Financing Activities		93,852			50,000			1,982,428

NET INCREASE (DECREASE) IN CASH		(27,445	)		(20,035	)		96

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		27,541			32,037			-

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	96		$	12,002		$	96

Supplemental disclosure of non cash investing & financing activities:
Cash paid for income taxes	$	-		$	-		$	-
Cash paid for interest expense	$	-		$	-		$	-


In February 2008, a note holder converted a $25,000 note payable into 16,667 shares of common stock ($1.50 per share).

See accompanying notes to unaudited financial statements

F-4

ALLIANCE RECOVERY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

AS OF MARCH 31, 2008

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

(B) Organization

Alliance Recovery Corporation (a development stage company) (the “Company”) was incorporated under the laws of the State of Delaware on November 6, 2001. The Company is developing resource recovery technologies and strategies to convert industrial and other waste materials into fuel oil, gases and other valuable commodities.

Activities during the development stage include developing the business plan and raising capital.

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

(D) Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. The Company at times has cash in excess of FDIC insurance limits and places its temporary cash investments with high credit quality financial institutions. At March 31, 2008, the Company did not have any balances that exceeded FDIC insurance limits.

(E) Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life of five years.

(F) Stock-Based Compensation

Effective January 1, 2006 The Company adopted SFAS No. 123R “Share-Based Payment” (“SFAS 123R”), a revision to SFAS No. 123 “Accounting for Stock-Based Compensation” (“SFAS 123”). Prior to the adoption of SFAS 123R the Company accounted for stock options in accordance with APB Opinion No. 25 “Accounting for Stock Issued to Employees” (the intrinsic value method), and accordingly, recognized no compensation expense for stock option grants.

F-5

Under the modified prospective approach, the provisions of SFAS 123R apply to new awards and to awards that were outstanding on January 1, 2006 that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized in the year ended December 31, 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant -date fair value estimated in accordance with the original provisions of SFAS 123, and the compensation costs for all share-based payments granted subsequent to January 31, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Prior periods were not restated to reflect the impact of adopting the new standard.

(G) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by Financial Accounting Standards No. 128, “Earnings Per Share.” As of March 31, 2008 and 2007, 2,403,197 and 2,154,896; respectively of common share equivalents were outstanding but anti-dilutive and therefore not used in the calculation of diluted net loss per share.

(H) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(I) Long-Lived Assets

The Company accounts for long-lived assets under the Statements of Financial Accounting Standards Nos. 142 and 144 “Accounting for Goodwill and Other Intangible Assets” and “Accounting for Impairment or Disposal of Long-Lived Assets” (“SFAS No. 142 and 144”). In accordance with SFAS No. 142 and 144, long-lived assets, goodwill and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.

(J) Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 ”. This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement

(K) Fair Value of Financial Instruments.

The carrying amounts reported in the balance sheet for cash, accounts payable, accrued expenses and notes payable approximate fair value based on the short-term maturity of these instruments.

(L) 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 statements 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.

F-6

NOTE 2 PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2008 and December 31, 2007 were as follows:


	March 31, 2008 (UNAUDITED)			December 31, 2007
Computer	$	11,166		$	11,166
Less accumulated depreciation		(9,213	)		(8,654	)

	$	1,953		$	2,512

During the three months ended March 31, 2008 and 2007 and for the period from November 6, 2001 to March 31, 2008, the Company recorded depreciation expense of $559, $558, and $9,213 respectively.

NOTE 3 NOTES

	March 31, 2008 (UNAUDITED)		December 31, 2007
Note Amount	$	-	$	25,000
Discount		-		-
Net	$	-	$	25,000

In December 2006, an investor loaned the Company a total of $25,000. The note is unsecured, due one year from the date of issuance and is non-interest bearing for the first nine months, then accrues interest at a rate of 6% per annum for the remaining three months. The Company imputed interest on the non interest-bearing portion of the notes at a rate of 6% per annum. During the years ended December 31, 2007 and 2006 the Company recorded a discount on the notes of $1,500 and amortized $341 and $1,159 of the discount respectively as interest expense. As of December 31, 2007 the note was in default. In February 2008 the note was converted into 16,667 shares of common stock ($1.50 per share) and the accrued interest of $1,500 was forgiven.

NOTE 4 NOTES PAYABLE - RELATED PARTY

In June 2006, a Director of the Company loaned the Company $100,000. The loan bears a rate of interest of 8% per annum and is payable twelve months from the date of issuance. In addition the Company issued the director warrants to purchase 100,000 shares of common stock with an exercise price of $1.50 per share for one year from the date of the note. The loan is unsecured and was due June 28, 2007. The note was extended until June 28, 2008. In December 2006, the Director loaned the Company an additional $50,000. The loan bears a rate of interest of 8% per annum and is payable eighteen months from the date of issuance. In January 2007 a director of the Company loaned the Company $50,000. The loan bears interest at a rate of eight percent per annum. The loan is unsecured and due July 31, 2008. As of December 31, 2007, the Company has an outstanding balance under the three note agreements of $200,000 and recorded accrued interest expense of $20,797 related to these three notes. As of March 31, 2008, the Company has an outstanding balance under the three note agreements of $200,000 and recorded accrued interest expense of $25,036 related to these three notes.

NOTE 5 CONVERTIBLE NOTES PAYABLE - RELATED PARTY

	March 31, 2008 (UNAUDITED)			December 31, 2007
Note Amount	$	140,000		$	140,000
Discount		(17,015	)		(19,622	)
Net	$	122,985		$	120,378

F-7

The Company will amortize the value over the term of the note. In June 2007 the wife of the Director loaned the Company an additional $40,000. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. The loan is unsecured and due July 3, 2009. The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life of two years. The fair value of the warrants on the date of issuance was $669. The Company will amortize the value over the term of the note. In November 2007, a Director of the Company loaned the Company an additional $50,000. The loan bears a rate of interest of 10% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.11 per share of common stock. In addition the Company issued the director warrants to purchase 454,550 shares of common stock with an exercise price of $.50 per share for two years from the date of the note. The loan is unsecured and due November 25, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 134%, risk-free interest rate of 2.92%, and expected warrant life of two years. The value of the warrants on the date of issuance was $19,351. The Company will amortize the value over the term of the note. As December 31, 2007 the Company recorded accrued interest expense of $4,614 and amortization expense of $1,235 related to these three notes. As of March 31, 2008, the Company recorded accrued interest expense of $7,665 and amortization expense of $2,607 related to these three notes.

NOTE 6 CONVERTIBLE NOTES PAYABLE

	March 31, 2008 (UNAUDITED)			December 31, 2007
Note Amount	$	100,001		$	100,001
Discount		(4,556	)		(5,468	)
Net	$	95,445		$	94,533

In July 2007, a third party loaned Company loaned the Company $100,001. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. In addition the Company issued the director warrants to purchase 100,001 shares of common stock with an exercise price of $1.00 per share for two years from the date of the note. The loan is unsecured and due July 5, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 111%, risk-free interest rate of 4.99%, and expected warrant life of two years. The fair value of the warrants on the date of issuance was $7,291. The Company will amortize the value over the term of the note. As of December 31, 2007 the Company recorded and accrued interest expense of $3,923 and amortization expense of $1,823 related to the note. As of March 31, 2008 the Company recorded and accrued interest expense of $5,918 and amortization expense of $912 related to the note.

NOTE 7 EQUITY SUBJECT TO RESCISSION

Common stock sold prior to July, 2005 pursuant to the Company's private placement offer may be in violation of the requirements of the Securities Act of 1933. In October 2005, the Company became aware that the private placement offers made prior to July 1, 2005 may have violated federal securities laws based on the inadequacy of the Company's disclosures made in its offering documents for the units concerning the lack of unauthorized shares. Based on potential violations that may have occurred under the Securities Act of 1933, the Company made a rescission offer to investors who acquired the Company's common stock prior to July 1, 2005. As such, the proceeds of $1,084,823 from the issuance of 1,986,646 shares of common stock through July 1, 2005 have been classified outside of equity in the balance sheet and classified as common stock subject to rescission.

During 2002, the Company received cash and subscriptions receivable of $148,000 for 296,000 units consisting of one share of common stock and one common stock warrant exercisable for a period of one year after an effective Registration Statement is approved at an exercise price of $1.00 ($0.50 per share). Such amounts have been recorded as equity subject to rescission as of December 31, 2007.

During 2003, the Company received cash and a subscription receivable of $661,323 for 1,322,646 units consisting of one share of common stock with one common stock warrant exercisable for a period of one year after an effective Registration Statement is approved at an exercise price of $1.00 ($0.50 per share). Such amounts have been recorded as equity subject to rescission as of December 31, 2007.

F-8

During the year ended December 31, 2004, the Company received cash of $92,500 for 185,000 units consisting of one share of common stock with one common stock warrant exercisable for a period of one year after an effective Registration Statement is approved at an exercise price of $1.00 per share ($0.50 per share). Such amounts have been recorded as equity subject to rescission as of December 31, 2007.

In 2005, the Company sold a total of 183,000 shares of common stock to nine individuals for cash of $183,000 ($1.00per share). Such amounts have been recorded as equity subject to rescission as of December 31, 2007.

NOTE 8 STOCKHOLDERS' EQUITY

(A) Common Stock Issued to Founders

During 2001, the Company issued 8,410,000 shares of common stock to founders for services with a fair value of $84,100 ($0.01 per share).

(B) Common Stock and Warrants Issued for Cash

During 2001, the Company received subscriptions receivable of $105,064 for 7,687,800 shares of common stock ($0.0137 per share).

During the year ended December 31, 2004, the Company collected $159,782 of subscriptions receivable.

In 2005, the Company sold a total of 183,000 shares of common stock to nine individuals for cash of $183,000 ($1.00 per share).

By the year ended December 31, 2005 the Company collected $42,774 of subscription receivables.

During April 2002, the Company entered into an agreement with a consultant to provide services for a period of one year. The agreement called for compensation of 100,000 units with a fair value of $50,000 based on recent cash offerings ($0.50 per share). The Company recorded $16,667 and $33,333 of consulting expense for the years ended December 31, 2003 and 2002, respectively. As of December 31, 2006, the warrants have expired.

During May 2002, the Company entered into an agreement with a consultant to provide services for a period of two months. The agreement called for compensation of 12,710 units, each unit consists of one share of common stock and one common stock warrant exercisable at $1.00 per share for a period of two years. The units had a fair value of $6,355 based on recent cash offerings. The Company recorded consulting expense of $6,355 for the year ended December 31, 2002 ($0.50 per share). As of December 31, 2006, the warrants have expired.

During July 2002, the Company entered into an agreement with a consultant to provide services for a period of one year. The agreement called for compensation of 100,000 units, each unit consists of one share of common stock and one common stock warrant exercisable at $1.00 per share for a period of two years. The units had a fair value of $50,000 based on recent cash offerings ($0.50 per share). The Company recorded $22,917 and $27,083 of consulting expense for the years ended December 31, 2002 and 2003, respectively.

During January 2004, the Company entered into a consulting agreement with a consultant to provide management and public relations services. The agreement calls for the consultant to provide services for a period of one year and the consultant to receive: 200,000 shares of common stock warrants to purchase 100,000 shares of common stock at an exercise price of $5.00 for a period of three years, and an option to purchase 100,000 shares of common stock at an exercise price of $7.50 for a period of three years. The common stock has a fair value of $100,000 based on recent cash offerings and will be amortized over the life of the agreement ($0.50 per share). For the years ended December 31, 2005 and 2004, the Company has recognized consulting expense of $4,158 and $95,842, respectively under the agreement. As of June 30, 2007, the warrants have expired.

In January 2005, the Company entered into a consulting agreement with a consultant to provide management and public relations services. The agreement calls for the consultant to provide services for a period of one year and the consultant to receive compensation of $2,000 per month. In addition the Company sold the consultant 300,000 shares of common stock for cash proceeds of $300 and recorded the fair value of the common stock of $149,700. The fair value of the common stock will be recognized over the term of the agreement. For the year ended December 31, 2005 the Company has recognized consulting expense of $143,463 under the agreement. For the year ended December 31, 2006 the Company recognized consulting expense of $6,237 under the agreement.

F-9

In March 2007, the Company entered into a consulting agreement with a consultant to provide management and public relations services. The agreement calls for the consultant to provide services for a period of one year and the consultant to receive compensation of $4,000 per month. In addition the Company sold the consultant 300,000 shares of common stock for cash proceeds of $300 and recorded the fair value of the common stock of $153,000. The fair value of the common stock will be recognized over the term of the agreement. The Company has also agreed to pay the public relation firm a 5% finder fee for any business or capital raise derived from its relationship with the public relations firm. The fair value of the common stock will be recognized over the term of the agreement. For the year ended December 31, 2007 the Company recorded an expense of $125,198 under this agreement and deferred compensation of $27,502.

In July 2007, the Company entered into a consulting agreement with a consultant to provide public relations services. The agreement calls for the consultant to provide services for a period of one month and the consultant to receive compensation of 278,000 shares of common stock with the fair value of the common stock of $83,400 ($.30 per share). The fair value of the common stock will be amortized over the term of the agreement. For the year ended December 31, 2007 the Company recorded an expense of $83,400 under this agreement.

In November 2007, the Company entered into a consulting agreement with a consultant to provide public relations services. The agreement calls for the consultant to provide services for a period of six months and the consultant to receive compensation of 240,000 shares of common stock with the fair value of the common stock of $36,000 ($.15 per share). The fair value of the common stock will be amortized over the term of the agreement. For the year ended December 31, 2007 the Company recorded an expense of $9,600 under this agreement and deferred compensation of $26,400.

In December 2007, the Company entered into a consulting agreement with a consultant to provide public relations services. The agreement calls for the consultant to provide services for a period of six months and the consultant to receive compensation of 500,000 shares of common stock with the fair value of the common stock of $50,000 ($.10 per share) per month. . In March 2008 the Company entered into a settlement agreement whereby the consultant acknowledged that no services had been performed on behalf of the Company and that all stock issued to them was returned and cancelled by Company.

(D) Common Stock and Warrants Issued for Conversion of Notes Payable

Between October and December 2005 three investors and a director loaned the Company a total of $205,000. The notes are unsecured, due one year from the date of issuance and are non interest bearing for the first nine months, then accrued interest at a rate of 6% per annum for the remaining three months. The Company imputed interest of $12,300 on the non interest-bearing portion of the notes at a rate of 6% per annum. On July 21, 2006, the Company amended four promissory notes (the “Amended Notes”) originally executed on October 7, 2005 in favor of Lewis Martin, James E. Schiebel, Susan Hutchison, and Walter Martin respectively (each a “Holder” and collectively the “Holders”). The Amended Notes provide for a conversion feature pursuant to which each Holder is entitled to convert the outstanding principal amount into shares of the Company's common stock at a conversion rate of $1.50 per share. In addition, upon conversion, each Holder is entitled to receive a warrant to purchase one-quarter of one share of our common stock exercisable within one-year of issuance at an exercise price of $1.50 per share. On July 24, 2006, pursuant to the terms of the Amended Notes, the Holders converted the principal amount outstanding into shares of our common stock. Based on same, we issued an aggregate of 136,669 shares of our common stock at a price of $1.50 per share (the “Conversion Shares”). In addition, we issued warrants with a cashless exercise provision to purchase an aggregate of 51,250 shares of our common stock to the Holders exercisable within one year of issuance at a price per share of $1.50 (the “Conversion Warrants”). The Conversion Shares and shares underlying the Conversion Warrants are restricted in accord with Rule 144 promulgated under the Securities Act of 1933, as amended.

F-10

In May 2007, a Director of the Company loaned the Company $50,000. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. In addition the Company issued the director warrants to purchase 25,000 shares of common stock with an exercise price of $1.00 per share for two years from the date of the note. The loan is unsecured and due May 17, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life of two years. The value of the warrants on the date of issuance was $837. The Company will amortize the value over the term of the note. In June 2007 the wife of the Director loaned the Company an additional $40,000. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. The loan is unsecured and due July 3, 2009. The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life of two years. The fair value of the warrants on the date of issuance was $669. The Company will amortize the value over the term of the note. In November 2007, a Director of the Company loaned the Company an additional $50,000. The loan bears a rate of interest of 10% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.11 per share of common stock. In addition the Company issued the director warrants to purchase 454,550 shares of common stock with an exercise price of $.50 per share for two years from the date of the note. The loan is unsecured and due November 25, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 134%, risk-free interest rate of 2.92%, and expected warrant life of two years. The value of the warrants on the date of issuance was $19,351. The Company will amortize the value over the term of the note. As December 31, 2007 the Company recorded accrued interest expense of $4,614 and amortization expense of $1,235 related to these three notes. As of March 31, 2008, the Company recorded accrued interest of $7,655 and amortization expense of $3,842 related to these three notes.

In July 2007, a third party loaned Company loaned the Company $100,001. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. In addition the Company issued the director warrants to purchase 100,001 shares of common stock with an exercise price of $1.00 per share for two years from the date of the note. The loan is unsecured and due July 5, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 111%, risk-free interest rate of 4.99%, and expected warrant life of two years. The fair value of the warrants on the date of issuance was $7,291. The Company will amortize the value over the term of the note. As of December 31, 2007, the Company recorded accrued interest expense of $3,923 and amortization expense of $1,823 related to the note. As of March 31, 2008, the Company recorded accrued interest of $5,918 and amortization expense of $2,734 related to the note.

In December 2006, an investor loaned the Company a total of $25,000. The note is unsecured, due one year from the date of issuance and is non-interest bearing for the first nine months, then accrues interest at a rate of 6% per annum for the remaining three months. The Company imputed interest on the non interest-bearing portion of the notes at a rate of 6% per annum. During the years ended December 31, 2007 and 2006 the Company recorded a discount on the notes of $1,500 and amortized $341 and $1,159 of the discount respectively as interest expense. As of December 31, 2007 the note was in default. In February 2008, the principal of $25,000 was converted into 16,667 shares of common stock ($1.50 per share) and the accrued interest of $1,500 was forgiven.

(E) Common Stock Warrants

The Company issued 765,146 warrants during 2004, at an exercise price of $1.00 per share to a consultant for services. The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model as required under SFAS 123 with the following weighted average assumptions: expected dividend yield 0%, volatility 0%, risk-free interest rate of 3.5%, and expected warrant life of one year. The fair value was immaterial and therefore no expense was recorded in general and administrative expense at the grant date. As of December 31, 2006, the warrants have expired.

In connection with the issuance of a $100,000 note payable on June 28, 2006, the Company issued a total of 100,000 common stock warrants with an exercise price of $1.50 per share. The warrants expired June 29, 2007. The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model as required under SFAS 123R with the following weighted average assumptions: expected dividend yield 0%, volatility 0%, risk-free interest rate of 5.18%, and expected warrant life of one year. The fair value was immaterial and therefore no expense was recorded.

In connection with the conversion of $205,000 of notes payable to common stock on July 24, 2006 the Company issued warrants with a cashless exercise provision to purchase an aggregate of 51,250 shares of our common stock to the Holders exercisable within one year of issuance at a price per share of $1.50 (the “Conversion Warrants”). The Conversion Shares and shares underlying the Conversion Warrants are restricted in accordance with Rule 144 promulgated under the Securities Act of 1933, as amended. These warrants expired during the quarter ended September 30, 2007

In connection with the issuance of common stock units for cash and services, the Company has an aggregate of 2,403,197 and 2,154,896 warrants outstanding at March 31, 2008 and December 31, 2007, respectively. The Company has reserved 2,821,692 shares of common stock for the future exercise of the warrants at March 31, 2008.

(F) Amendment to Articles of Incorporation

During 2004, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 100,000,000 common shares at a par value of $0.01 per share.

F-11

(G) Financing Agreement

On May 29, 2007, the Company entered into an Investment Agreement. Pursuant to this Agreement, the Investor shall commit to purchase up to $20,000,000 of the Company's common stock over the course of thirty-six (36) months. The amount that we shall be entitled to request from each purchase (“Puts”) shall be equal to, at the Company's election, either (i) up to $250,000 or (ii) 200% of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the applicable put notice date, multiplied by the average of the three (3) daily closing bid prices immediately preceding the put date. The put date shall be the date that the Investor receives a put notice of a draw down by us. The purchase price shall be set at ninety-four percent (94%) of the lowest closing bid price of the common stock during the pricing period. The pricing period shall be the five (5) consecutive trading days immediately after the put notice date. There are put restrictions applied on days between the put date and the closing date with respect to that particular Put. During this time, we shall not be entitled to deliver another put notice. Further, we shall reserve the right to withdraw that portion of the Put that is below seventy-five percent (75%) of the lowest closing bid prices for the 10-trading day period immediately preceding each put notice. The Company was obligated to pay $15,000 preparation fee for the documents. $10,000 of which was paid upon the execution of the agreement and $5,000 was paid upon the closing of the first put.

The Company filed a registration statement with the Securities and Exchange Commission (“SEC”) covering 15,000,000 shares of the common stock underlying the Investment Agreement. In addition, the Company is obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the closing date. The Company will have an ongoing obligation to register additional shares of our common stock as necessary underlying the drawdowns.

During the year ended December 31, 2007 the Company drew down a total of $47,188 and issued a total of 338,600 shares of common stock

During the three months ended March 31, 2008 the Company drew down a total of $93,852 and issued a total of 499,000 shares of common stock.

NOTE 9 RELATED PARTY TRANSACTIONS

In May 2007, a Director of the Company loaned the Company $50,000. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. In addition the Company issued the director warrants to purchase 25,000 shares of common stock with an exercise price of $1.00 per share for two years from the date of the note. The loan is unsecured and due May 17, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life of two years. The value of the warrants on the date of issuance was $837. The Company will amortize the value over the term of the note. In June 2007 the wife of the Director loaned the Company an additional $40,000. The loan bears a rate of interest of 8% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. The loan is unsecured and due July 3, 2009. The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant life of two years. The fair value of the warrants on the date of issuance was $669. The Company will amortize the value over the term of the note. In November 2007, a Director of the Company loaned the Company an additional $50,000. The loan bears a rate of interest of 10% per annum and is payable twenty-four months from the date of issuance. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.11 per share of common stock. In addition the Company issued the director warrants to purchase 454,550 shares of common stock with an exercise price of $.50 per share for two years from the date of the note. The loan is unsecured and due November 25, 2009.The fair value of the warrants was estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0%, volatility 134%, risk-free interest rate of 2.92%, and expected warrant life of two years. The value of the warrants on the date of issuance was $19,351. The Company will amortize the value over the term of the note. As December 31, 2007 the Company recorded accrued interest expense of $4,614 and amortization expense of $1,235 related to these three notes. As of March 31, 2008 the Company recorded accrued interest expense of $7,655 and amortization expense of $3,842 related to these three notes.

F-12

During December 2001, the Company entered into an agreement with a consultant to serve as its interim President for a term of up to five years. The agreement called for annual compensation of $250,000. The agreement expires the earlier of December 2006 or on the effectiveness of an employment agreement and is renewable annually after December 2006. During 2006, the Company approved a one-year renewal of the agreement. The Company has accrued $427,493 under the agreement to the consultant at December 31, 2007. For the Period November 6, 2001(Inception) to December 31, 2007 the Company recorded $1,520,833 of expenses associated with this agreement. For the Period November 6, 2001(Inception) to March 31, 2008 the Company recorded $1,583,833 of expenses associated with this agreement. For the three months ended March 31, 2007 and 2008 the Company recorded $62,500 of expenses associated with this agreement

During 2004, the Company entered into an employment agreement with a consultant to assume the position of Chief Executive Officer and President for a term of five years at an annual minimum salary of $250,000 with additional bonuses and fringe benefits. The agreement is to become effective upon the approval by the Securities and Exchange Commission on the SB-2 Registration Statement. During March 2006, the Company and the President amended the start date to begin upon the Company raises all or substantially all the project funding pertaining to the first facility. As of the date of this report, the Company has not completed the funding. (See Note 10(A) and 12).

NOTE 10 COMMITMENTS AND CONTINGENCIES

(A) Consulting Agreements

During 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).

F-13

In January 2005, the Company entered into a consulting agreement with a consultant to provide management and public relations services. The agreement calls for the consultant to provide services for a period of one year and the consultant to receive compensation of $2,000 per month. In addition the Company sold the consultant 300,000 shares of common stock for cash proceeds of $300 and recorded the fair value of the common stock of $149,700. The fair value of the common stock will be recognized over the term of the agreement. For the year ended December 31, 2005, the Company has recognized consulting expense of $143,463 under the agreement. During the year ended December 31, 2006, the Company has recognized consulting expense of $6,237 under the agreement.

In March 2007, the Company entered into a consulting agreement with a consultant to provide management and public relations services. The agreement calls for the consultant to provide services for a period of one year and the consultant to receive compensation of $4,000 per month. In addition the Company sold the consultant 300,000 shares of common stock for cash proceeds of $300 and recorded the fair value of the common stock of $153,000. The fair value of the common stock will be recognized over the term of the agreement. The Company has also agreed to pay the public relation firm a 5% finder fee for any business or capital raise derived from its relationship with the public relations firm. The fair value of the common stock will be recognized over the term of the agreement. For the three months ended March 31, 2007 the Company recorded an expense of $10,673 under this agreement and deferred compensation of $142,327. For the three months ended March 31, 2008 recorded an expense of $27,502 under this agreement.

In December 2007, the Company entered into a consulting agreement with a consultant to provide public relations services. The agreement calls for the consultant to provide services for a period of six months and the consultant to receive compensation of 500,000 shares of common stock with the fair value of the common stock of $50,000 ($.10 per share) per month. In March 2008 the Company entered into a settlement agreement whereby the consultant acknowledged that no services had been performed on behalf of the Company and that all stock issued to them was returned and cancelled by Company.

(B) License Agreement

Upon effectiveness of the employment agreement with our Chief Executive Officer and President, the Company will be entitled to use certain technology and know-how that is owned by our Chief Executive Officer and President royalty free until the end of the employment agreement. Upon termination of the employment agreement with the Chief Executive Officer and President, the Company has the right to license the technology for a onetime fee. The license fee will be negotiated by the Company and the Chief Executive Officer and will equal the replacement value of such technology and will be determined with reference to the engineer's opinion dated March 6, 2002, a copy of which is attached to the employment agreement (See Note 9).

(D) Rescission Offer

Common stock sold prior to July 1, 2005 pursuant to the Company's private placement offer may be in violation of the requirements of the Securities Act of 1933. In October 2005, the Company became aware that the private placement offers made prior to July 1, 2005 may have violated federal and state securities laws based on the inadequacy of the Company's disclosures made in its offering documents for the units concerning the lack of unauthorized shares. Under state securities laws the investor can sue us to recover the consideration paid for the security together with interest at the legal rate, less the amount of any income received from the security, or for damages if he or she no longer owns the security or if the consideration given for the security is not capable of being returned.

F-14

Damages generally are equal to the difference between the purchase price plus interest at the legal rate and the value of the security at the time it was disposed of by the investor plus the amount of any income, if any, received from the security by the investor. Generally, certain state securities laws provide that no suit can be maintained by an investor to enforce any liability created under certain state securities statues if the seller makes a written offer to refund the consideration paid together with interest at the legal rate less the amount of any income, if any, received on the security or to pay damages and the investor refuses or fails to accept the offer within a specified period of time, generally not exceeding 30 days from the date the offer is received. In addition, the various states in which the purchasers reside could bring administrative actions against as a result of the rescission offer.

The remedies vary from state to state but could include enjoining us from further violations of the subject state law, imposing civil penalties, seeking administrative assessments and costs for the investigations or bringing suit for damages on behalf of the purchaser.

There is considerable legal uncertainty under both federal securities and related laws concerning the efficacy of rescission offers and general waivers with respect to barring claims that would be based on the failure to disclose information described above in a private placement. The SEC takes the position that acceptance or rejection of an offer of rescission may not bar stockholders from asserting claims for alleged violations of federal securities laws. Further, under California's Blue Sky law, which would apply to stockholders resident in that state, a claim or action based on fraud may not be waived or prohibited pursuant to a rescission offer. As a result, the rescission offer may not terminate any or all-potential liability that we may have in connection with that private placement. In addition, there can be no assurance that we will be able to enforce the waiver we received in connection with the rescission offer to bar any claims based on allegations of fraud or other federal or state law violations that the rescission offer, may have, until the applicable statutes of limitations have run.

Based on potential violations that may have occurred under the Securities Act of 1933, the Company made a rescission offer to investors who acquired the Company's common stock prior to July 1, 2005. As such, the proceeds of $1,084,823 from the issuance of 1,986,646 shares of common stock through July 1, 2005 have been classified outside of equity in the balance sheet and classified as common stock subject to rescission.

NOTE 11 GOING CONCERN

As reflected in the accompanying financial statements, the Company is in the development stage with no operations, a stockholders' deficiency of $2,008,488 a working capital deficiency of $707,188 and used cash in operations from inception of $1,981,166. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

NOTE 12 SUBSEQUENT EVENTS

In April 2008, a Director of the Company and his Son each loaned the Company $125,000. The loan bears a rate of interest of 3.33% per month and is payable July 3, 2008. The holder of the note has the right to convert the note into common stock of the Company at the market value on the date of conversion but not at a price less than $.20 per share of common stock. In addition the Company issued the director and his son warrants to each purchase 625,000 shares of common stock with an exercise price of $.20 per share and expire April 5, 2018. The loans are unsecured.

In April 2008 the Company drew down a total of $49,243 and issued a total of 186,000 shares of common stock pursuant to its financing agreement.

In April 2008 the Company entered into a six month consulting agreement with a consulting firm to provide management and public relations services. In April 2008 the Company paid the consulting firm $200,000.

F-15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

Overview

We are a developmental stage company that is in the process of implementing our business plan to develop a showcase waste to energy facility at a site to be determined. The first showcase installation will be the cornerstone for both United States and European expansion. It will thermally convert rubber waste to oil and subsequently use the oil as fuel for large reciprocating engines driving alternators making electricity. In addition to the sale of electricity, several additional valuable bi-products produced in the thermal conversion process will also be sold into either domestic or international markets.

Our business plan is focused on providing large urban centers with community based processing facilities to address the needs of rubber waste disposal where the waste is generated. This rubber waste is largely scrap tires. Similarly, large urban centers also have an increasing requirement for electrical energy for both domestic and industrial use. Our processing facilities can be located, constructed and operated to meet the specific needs of the community in an environmentally friendly manner.

We believe that the effective implementation of our business plan will result in our position as a provider of community based waste to energy installations dealing with rubber waste at source while providing reliable electrical energy to meet base load and/or on peak energy demands.

The successful implementation of the business plan will also be dependent on our ability to meet the challenges of developing a management team capable of not only the construction and operation of the first installation but also marketing management and the implementation of specific marketing strategies.

These strategies will include the utilization of specific existing distributors currently in the business of marketing carbon black. As well, we will be going to regional disposal operators and collectors to offer our services as a point of final disposition for their collection and disposal requirements.

Additionally, it will be necessary to educate targeted jurisdictions about the environmental and commercial benefits of an Alliance installation in their community.

During the fiscal quarter March 31, 2008, no revenues were generated and we do not anticipate revenues until such time as the first facility has been constructed and commercially operated. The construction of the first showcase facility will require $20 million. However, currently there are no commitments for capital and furthermore, the successful implementation of all aspects of the business plan is subject to our ability to complete the $20 million capitalization. It is expected the required funds will be raised as a result of private offerings of securities or debt, or other sources.

We entered into a Consulting Agreement with Global Consulting Group, Inc (“Global Consulting”) on September 9, 2007. The Consulting Agreement was amended on September 17, 2007 and again on September 27, 2007. Pursuant to the Consulting Agreement, as amended, Global Consulting will consult and advise the Company on matters pertaining to corporate exposure/investor awareness, telephone marketing/advertising campaigns, business modeling and development and the release of press releases. More specifically, Global Consulting will contact 3,000 stockbrokers each month to create better awareness of the Company. The Consulting Agreement, as amended, is for a commitment period of four months from September 9, 2007, and requires payment from the Company to Global Consulting on the commencement date of the Consulting Agreement or shortly thereafter. Payment is defined as the issuance of 278,000 of shares of the Company’s common stock to be issued to Global Consulting.

To satisfy the terms of the Amended Consulting Agreement, we issued 278,000 shares of our common stock to Global Consulting on September 27, 2007. The Consulting Agreement, as amended, may be terminated, without cause, by either the Company or the Consultant with 30 day prior notice.

The Consulting Agreement entered into with Global Consulting requires the issuance of additional shares which will dilute the ownership held by our shareholders. In particular, pursuant to the Consulting Agreement, as amended, the Company has issued 278,000 shares of its common stock pursuant to Global Consulting, which will further dilute the percentage ownership held by the stockholders. On the other hand, however, the Consulting Agreement entered into with Global Consulting could result in an increase in our common stock’s bid price based on improvements to our corporate image, marketing/advertising campaigns, and general business development. The Consulting Agreement may also have a positive impact on our ability to generate revenue, as improvement in general business development could lead to new revenue generating opportunities.

Should the required funding not be forthcoming from the aforementioned sources, public offerings of equity, or securities convertible into equity may be necessary. In any event, our investors should assume that any additional funding will cause substantial dilution to current stockholders. In addition, we may not be able to raise additional funds on favorable terms, if at all.

On December 17, 2007, we entered into a Marketing Agreement (the “Marketing Agreement”) with QualityStocks, LLC (“QualityStocks”). Pursuant to the Marketing Agreement, QualityStocks, would assist with press release drafting, prepare a Video Corporate Profile of Alliance Recovery Corporation, include news and facts about Alliance Recovery Corporation within its monthly newsletters, and hold a CEO interview with Alliance Recovery Corporation CEO Peter Vaisler once each quarter.

The term of the Marketing Agreement began December 10, 2007 and ends June 30, 2008. On March 26, 2008 the Marketing Agreement was canceled.

Additionally, on January 15, 2008 and February 1, 2008 we entered into an Investor Relations/Public Relations Agreement (collectively, the “Agreements”) with FiveMore Fund, Ltd. and Mainland Participation Corp., respectively (individually, the “Consultant” and collectively, the “Consultants”). Pursuant to the Agreements, Consultants were scheduled to (a) advise us with respect to our plans and strategies for raising capital; (b) aid us in developing a marketing plan directed at informing the investing public as to the business of Client; (c) assist us in its discussions with underwriters, investors, brokers and institutions and other professionals retained by us; (d) inform us about US and international banks offering stock based credit line facilities; (e) assist us with identifying possible acquisitions or merger candidates; (f) advise and assist us with public relations and promotion matters; (g) assist us with a potential listing at Frankfurt Stock Exchange; and (h) introduce members of us to US and European securities dealers and market makers, if we so desire. At no time will either Consultant provide services which would require the Consultant to be registered and licensed with any federal or state regulatory body or self-regulating agency.

On March 4, 2008 we canceled the Agreements.

Our independent auditor has expressed substantial doubt about our ability to continue as a going concern. The notes to our financial statements include an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Among the reasons cited in the notes as raising substantial doubt as to our ability to continue as a going concern are the following: we are a development stage company with no operations, a stockholders’ deficiency of $2,008,488 and cash used in operations from inception through March 31, 2008 of $1,981,166. As of March 31, 2008, we had a working capital deficiency of $707,188.

Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise additional capital and generate revenues. These conditions raise substantial doubt about our ability to continue as a going concern.

Plan of Operations

Management has forged relations with several corporate finance entities that have expressed an interest in participating in our overall expansion in the United States and Europe.

The efforts of our management team, our consultants and advisors will be to complete appropriate financing arrangements. The completion of the $20,000,000 financing will be our exclusive effort prior to the construction and development of the first installation.

Upon completion of the $20,000,000 capitalization, our next priority will be the construction of the first installation. For this construction, it will be necessary for management to initially focus on two specific activities. First, project management consultants will be engaged to assist us in all matters associated with identifying and preparing the site. This activity includes regulatory approvals as well as final design and layout based upon commercial equipment available for procurement and/or fabrication

In the event we are not able to raise $20,000,000 to complete construction of our first showcase facility, we will be forced to seek additional financing in order to maintain operations over the next 12 months.

In addition, we will continue to develop our industry contacts, develop our business plan, refine our technology, search for suitable sites, and devote efforts to secure the capital required to implement our business plan.

Second, our management and consulting engineers will commence activities to enlarge our management team by adding key employees as well as consultants that will be responsible for specific tasks & operations associated with the first installation.

During the permitting period, estimated by management and their consulting engineers, to be 90 to 120 days, our engineering and fabrication team will finalize design and layouts for the first site as well as prepare and circulate site building bid documents. Similarly, turnkey contracts will be negotiated for specific pieces of the thermal processing equipment utilized in the rubber to oil conversion process.

The supply and operation of the electrical generation equipment will also be contracted out during this period of the development. We have already identified and pre-qualified several suppliers of the type of electrical generation equipment. However, as a result of the preliminary stage of these discussions, we are unable to provide greater detail as to the exact nature of the relationship or participation of these suppliers.

Also at this time, some preliminary site work will be completed to facilitate the installation of the design/build structures required. The site will also be prepared to accept the modularized electrical generation equipment that will be installed on the site subsequent to the installation and start-up of the thermal conversion process. The contracted operator of the electrical generation equipment will also be responsible for the sale of electricity. During initial discussions with these supplier/operators, an interest has been expressed in participating in our overall business. Some discussions pertaining to the exchange of our shares for all, or part, of the value of the turnkey have transpired. However, it is unlikely that meaningful discussions will commence until such time as our capitalization set forth above has been completed. Even if the capitalization has been completed, there can be no certainty that the contract operators will participate in the first installation other than on a fee for services basis. In any event, until such time as the $20 Million capitalization has been completed, specific details pertaining to the participation of supplier/operators will not be available and we are unable to provide the details of any possible forthcoming agreements.

Management and their consulting engineers believe that, the overall fabrication and installation timeframe is approximately 18 months from execution of contracts. As all the components utilized in our installation are currently in use in manufacturing operations in the United States and around the world, lead times for delivery and installation are generally short.

Several components are stock items and available for almost immediate delivery. However, the engineering firm responsible for the overall project management of the first installation will monitor all fabricator/suppliers to ensure that the various components and required ancillary equipment and structures have been readied onsite for installation. Additionally, engineering verification will be required for all progress draws prior to our making payments to the various supplier/fabricators. As is customary with the supply of this type of equipment, established payment holdbacks upon completion of installation and start-up will be released only upon engineering verification of performance. Additionally, it may be necessary for selected fabricator/suppliers to provide delivery and performance bonds specific to their components.

The entire project could be delayed as a direct result of several factors. Should we not be able to a lease or purchase a suitable property within a timely manner, the project could be delayed indefinitely until such time as an appropriate site is secured. Although we have located several suitable sites that could be appropriately permitted, unforeseen regulatory changes could make it difficult to obtain the required permits causing further delays thereby causing us to take additional time to identify other suitable sites. Should there be delays in the delivery of thermal processing or electrical generation equipment as a result of material shortages, labor problems, transportation difficulties etc., our commercial operation would be delayed thereby not allowing us to generate revenues as anticipated. Should the delay be lengthy, management could be required to seek additional financing or seek other remedies in law pertaining to delivery and performance failures of the fabricator suppliers. Regulatory changes causing delays in the construction, processing equipment installation and start-up of the showcase facility will lengthen the period of time for us to start to generate revenues from operations. We will only be in the position to commence a US expansion of processing facilities upon the successful completion, start-up and operation of the showcase facility.

The supplier/fabricators will also be responsible for the training of key employees and/or contractors and will work with the engineering project managers to include established operating protocols in the systems operations manual. In conjunction with this effort, during the start-up of the first installation, fabricator/suppliers and the project management will establish operating set points incorporating them into the system software thereby ensuring continued reliable system performance and measurable quality standards.

It is management’s and their consulting engineers opinion that overall, the entire installation through construction completion, training, start-up and commercial acceptance based upon engineering performance verification is approximately 18 months. The overall development schedule could be delayed as a result of unforeseen regulatory delays, labor disputes and seasonal delays due to weather conditions.

Pursuant to preliminary discussions with corporate finance professionals, items #16 through #18 set forth below are anticipated fees and expenses pertaining to the $20,000,000 financing that we will be seeking. The following schedule outlines the categories associated with the financing, completion, start-up and commercial operation of the first installation. It is expected that many of the following development categories outlined in the following schedule will be completed concurrently.

1) Consulting Fees & Out-of -Pocket Reimbursement	$	480,000
2) Site Lease Matters & Development Fees	$	260,000
3) Site Engineering, Regulatory & Compliance	$	211,500
4) Site Work	$	1,125,600
5) Buildings	$	798,500
6) Rubber to Oil Thermal Conversion Process Equipment	$	7,736,500
7) Warehouse & Conveyance Equipment Leases/Purchases	$	74,083
8) Government Relations	$	41,000
9) Administrative Construction Expenses	$	153,000
10)Legal, Accounting, Travel & Misc. Fees & Expenses	$	322,000
11)Media, Promotion & Government Relations	$	313,000
13)Salaries, Wages & Fees	$	846,434
14)Consulting Engineers	$	33,000
15)Turn-key Energy System & Installation	$	5,000,000
16)Financing Fees	$	2,000,000
17)Financing Legal & Accounting	$	300,000
18)Administrative Contingency	$	305,383
Total	$	20,000,000

During the construction and installation of the first facility, our future Vice President of Marketing with assistance from our future Vice President of Technology will commence a specific and targeted marketing campaign directed at the current rubber waste disposal infrastructure, regulatory agencies, retail associations and the public. Promotional activities will include media, public awareness, trade journals, seminars and meetings and discussions with waste hauler and disposal companies. These activities will also include meetings and discussions with state regulatory and enforcement officials.

Based upon discussions with state regulators, it is our belief that all communities in the United States and Canada are being encouraged by state, provincial and federal authorities to be more environmentally responsible. An example of amplified environmental concern occurring in 2004 was the State of Michigan’s position pertaining to the continued dumping of waste from out-of-state communities that included Toronto, Ontario, Canada. State regulations were implemented in an attempt to curtail the amount and sources of waste being disposed at Michigan dump sites. It is our belief, that since the early 1990s the federal EPA has been concerned with the interstate transportation of waste. The federal position seems to be that communities that generate should be responsible for the ultimate disposition of the waste within their municipality. An attempt to limit interstate transportation of waste was contained in the Interstate Modal Transportation Act which was never approved as originally proposed.

Community based environmental initiatives are being encouraged. Dealing with waste at the source is considered much more environmentally friendly than trucking the waste hundreds of miles away. The first installation is perceived as a convenient and environmentally friendly solution to rubber waste. The targeted marketing campaign will exploit the current thinking pertaining to community based waste reduction and processing and waste to energy initiatives.

However, there may be difficulties associated with encouraging the existing disposal and transportation infrastructure to utilize the Alliance installation as an alternative to their current method of disposal. Historic relationships between the existing infrastructure serving retailers and dumps or processors often hundreds of miles away and the financial commitment to the trucking the waste may be difficult to overcome. However, management’s discussion with several haulers has been encouraging as a cost effective alternative to the existing transportation of waste to often out-of-state locations is a welcomed alternative.

A targeted marketing campaign pertaining to the sale of carbon black and scrap steel will also commence prior to completion of construction. However, we may not be positioned to enter into carbon black supply contracts until such time as samples are made available from the operation of the showcase facility. It is likely that these samples would be made available as a result of operation the processing equipment during the performance testing phase of the installation and immediately prior to commercial certification. The commercial certification will occur after the equipment has operated for a period of approximately 90 days and all contract performance specifications have been achieved.

There may be delays associated with the correction of deficiencies in order that the processing equipment meet certain performance standards prior to commercial certification. However, the Company has included the 90 day start-up phase within the overall timeline to allow for the correction of deficiencies by fabricator suppliers. Although the vast majority of the rubber to oil system is based upon off-the-shelf components, if further delays occur as a result of fabricator suppliers correction of deficiencies, we could be delayed in our ability to generate revenue.

Although, we have identified several experts currently responsible for the sale of carbon products currently with other companies and they have expressed an interest in the position of VP Marketing, there is no guarantee that their previous experience will allow them to successfully initiate a campaign that will lead to the sale of our carbon black. However, the successful operation of the thermal system will generate commercial grades of carbon black that could be utilized by rubber formulation companies for specific products. Additionally, our carbon black could be blended with other sources of carbon black thereby allowing rubber formulators to meet customers requirements for recycled content. We believe our carbon black will be advantageous to other forms of recycled content as it will be is a virgin product made from oil that is a waste rubber derivative.

Furthermore, the heat recovery system utilized throughout the entire electrical generation system will be available to deliver steam for additional industrial uses. Heat recovery boilers utilized in the system can make steam available for use in a steam turbine to make additional electricity for sale by ARC. The recovered heat could also be utilized in several industrial applications.

The ARC installation is designed to operate continuously. As a result, the installation has the ability to produce heat constantly to service the steam requirements of a turbine generating electricity or other commercial uses. The heat produced can be considered a bi-product from the operation of the thermal conversion and electrical generation equipment. Rather than utilizing the heat source for any particular use, we could also use a commercial cooling tower to cool the thermal processing equipment and could decide not to operate the heat recovery system components associated with the reciprocating engines responsible for the generation of electricity. However, management believes that utilizing the bi-product heat capacity in an environmentally friendly way to generate additional electricity is a common sense alternative to exhausting heat into the atmosphere.

If the Company was to move forward with a hydroponics initiative as an alternative to a steam turbine or industrial uses, the type of relationship previously discussed is based upon the notion that the hydroponics greenhouse operator would lease a site immediately adjacent to the showcase facility. Based upon our final equipment selection, pertaining to both the thermal conversion of rubber to oil and the generation of electricity, we will be positioned to provide details as to the amount of steam and/or hot water that be generated for conveyance to the greenhouse via an insulated pipeline. A heat exchanger could transfer the heat from the ARC steam and/or hot water to the hot water in the hydroponics operator’s underground reservoir.

Regardless of the ultimate use of the recovered steam, the ARC cooled condensate and/or water will be returned to the ARC heat recovery boilers heated again for reuse in a closed loop system.

Should ARC utilize the steam in a turbine, further electrical energy will be available to sell into the grid. However, if the recovered steam and/or heat is utilized in industrial or other applications a discounted avoided cost, defined as the operators cost of natural gas or fuel oil less a negotiated discount, will be used to determine the recovered heat's selling price. We will not be positioned to make a final decision in connection to the use of the recovered heat until a development site has been agreed upon and the $20,000,000 financing has been completed.

Going Concern Consideration

As reflected in the accompanying March 31, 2008 financial statements we are in the development stage with no operations, a stockholders’ deficiency of $2,008,488, a working capital deficiency of $707,188 and used cash in operations from inception of $1,981,166. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

We believe that actions presently being taken to obtain additional funding and implement our strategic plans provide the opportunity for us to continue as a going concern.

Liquidity and Capital Resources

Our balance sheet as of March 31, 2008 reflects assets of $7,469 consisting of cash of $96, prepaid expenses of $5,420, and property and equipment of $1,953, compared to assets of $30,053 as of December 31, 2007. As of March 31, 2008, we had current liabilities of $712,704 consisting of accounts payable and accrued interest of $101,481, an amount of $411,223 due to a related party and a note payable due to a related party of $200,000. In comparison to December 31, 2007, we had current liabilities of $737,643 which consisted of accounts payable and accrued interest of $85,150, an amount of $427,493 due to a related party, a note payable of $25,000 with a net discount of $0 and a note payable due to a related party of $200,000.

Cash and cash equivalents from inception to date have been sufficient to cover expenses involved in starting our business. We will require additional funds to continue to implement and expand our business plan during the next twelve months.

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recent Accounting Pronouncements

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain market risks, including changes in interest rates. The Company does not undertake any specific actions to limit those exposures.

Item 4. Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Accounting Officer (“CAO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) und er the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CAO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CAO, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Controls over Financial Reporting

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of consolidated financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s management, including the Company’s CEO and CAO, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of March 31, 2008.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this quarterly report.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Currently we are not aware of any litigation pending or threatened by or against the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None

Item 6. Exhibits and Reports of Form 8-K.

(a) Exhibits

31.1 Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1 Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002

(b) Reports of Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ALLIANCE RECOVERY CORPORATION

Date: May 19, 2008	By:	/s/ Peter Vaisler
		Peter Vaisler
		Chief Executive Officer Principal Financial Officer, Principal Accounting Officer

ALLIANCE RECOVERY CORP 10-Q